/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/010518.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, May 18, 2001, Vol. 5, No. 98 Headlines AMERICAN HOMEPATIENT: Lenders Agree To Extend Credit Term BOSTON CHICKEN: Houlihan Lokey Catches Plan Trustee's Attention BRIGGS & STRATTON: S&P Lowers Ratings to BBB- From BBB+ BROADBAND OFFICE: Case Summary & 20 Largest Unsecured Creditors CALYPTE BIOMEDICAL: Shares Face Delisting From Nasdaq CASTLE DENTAL: Taps Haynes & Boone As Counsel In Restructuring CASUAL MALE: Denies Bankruptcy Reports CT HOLDINGS: Shares Knocked off Nasdaq, Now Trading On OTCBB DERBY CYCLE: S&P Cuts Long-Term, Bank Loan Ratings to D From CCC DOLPHIN TELECOM: Says It May Not Be Able To Pay Debts This Year DOLPHIN TELECOM: Moody's Downgrades Notes' Rating To Ca DYERSBURG CORPORATION: Downsizing Operations To Reduce Costs EDISON INT'L: Board Decides To Eliminate Q2 Dividend Payments FUTUREONE: Releases Second Quarter Results GENESIS HEALTH: Seeks Court Nod On Swap Settlement With Citibank GTC TELECOM: Needs More Funds To Continue As A Going Concern HARNISCHFEGER: Resolves Claim Dispute with NatWest Bank HUNGRY MINDS: Posts $8MM Loss & Confirms Plan to Sell Business INTEGRATED HEALTH: Transfers Cheyenne Facility To Preferred Care J.C. PENNEY: Fitch Lowers Notes' Rating To BB+ From BBB- LA MANCHA: UAW Makes $9.75 Million Bid For Palm Springs Resort LODGIAN INC.: Amends Senior Secured Loan Credit Facility LOEWEN: Missouri Unit Seeks Authority To Sell Assets For $100K LTV CORPORATION: Resolves Contract Dispute With Peoples Energy MARINER: Court Allows Alice Frakes To File Late Proof of Claim MARTIN INDUSTRIES: AmSouth Bank Agrees To Extend Credit Facility MATTRESS DISCOUNTERS: S&P Junks Corporate & Senior Debt Ratings NTEX INCORPORATED: Noteholders Endorse Plan of Arrangement ORIUS CORPORATION: S&P Places Low-B Credit Ratings On Watch PACIFIC GAS: Funding Energy Programs & Paying Pre-Petition Taxes PILLOWTEX: Closing Some Operations in Kannapolis And Columbus PSINET INC.: Tells SEC Form 10-Q Will Be Late REGAL CINEMAS: Creditors Demand Payment For $1.8 Billion Debt RITE AID: Expects To Close $3.0 Billion Refinancing Deal in Q2 TANDYCRAFTS: Files Chapter 11 Petition in Wilmington TANDYCRAFTS: Case Summary & 20 Largest Unsecured Creditors THERMADYNE HOLDINGS: Credit Ratings Fall To Junk Levels TRI VALLEY: Completes Final Sale Of Assets UNIFORET INC.: Gets 45-Day Extension To File Plan of Arrangement US INTERACTIVE: Securities Kicked Off From Nasdaq W.R. GRACE: Rejecting Six Burdensome Lease Agreements WARNACO GROUP: Obtains Waiver of Certain Debt Covenants WOMEN.COM: Says Capital Is Insufficient To Sustain Operations WORLD KITCHEN: Posts $44.9 Million Net Loss For Q1 2001 ZAMIAS SERVICES: Files for Chapter 11 Protection in Pittsburgh ZAMIAS SERVICES: Chapter 11 Case Summary ZANY BRAINY: Wells Fargo Extends $115 Million DIP Financing BOOK REVIEW: The Wreck of the Penn Central ********* AMERICAN HOMEPATIENT: Lenders Agree To Extend Credit Term --------------------------------------------------------- American HomePatient, Inc. (OTC:AHOM) reported its financial results for the three months ended March 31, 2001. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter was $12.0 million, representing an increase of $2.8 million over the same quarter of 2000. The Company's net loss for the first quarter of 2001 was $(6.6) million compared to $(8.6) million for the first quarter of 2000. Revenue for the three months ended March 31, 2001 was $91.1 million, up from $87.9 million reported for the same three-month period of 2000, representing an increase of $3.2 million. The revenue increase over the prior-year quarter is the result of internal growth of approximately 3% along with the consolidation of several of the Company's joint ventures beginning in the second quarter of 2000, offset by lost revenue associated with the termination of a contract effective January 2001. EBITDA margin for the first three months of 2001 was 13.2% of net revenue compared to 10.5% for the first three months of 2000. Overall, operating expenses decreased in the current three-month period compared to last year. This decrease is due primarily to a significant improvement in bad debt expense. As a percentage of revenue, bad debt expense in the first quarter of 2001 was 4.3% compared to 7.8% in the first quarter of 2000. This improvement in bad debt expense is largely the result of improved cash collections resulting from the redesign and standardization of reimbursement processes and the consolidation of certain billing locations into larger regional billing centers. The Company and its lender group also announced that they have reached an agreement in principal to amend the Company's current credit agreement. As previously reported, the Company is in default under its credit facility as a result of breaching several financial covenants and failing to make a principal payment due March 15, 2001. The amended credit agreement is expected to cure the current defaults, amend the principal amortization schedule, and extend the term of the agreement to December 31, 2002. The Company expects to finalize the amendment on or about May 18, 2001. American HomePatient is one of the nation's largest home health care providers with over 300 centers in 38 states. Its product and service offerings include respiratory services, infusion therapy, parenteral and enteral nutrition, and medical equipment for patients in their home. American HomePatient's common stock is currently traded over-the-counter under the symbol AHOM. BOSTON CHICKEN: Houlihan Lokey Catches Plan Trustee's Attention --------------------------------------------------------------- Gerald K. Smith, in his capacity as the Trustee of the Boston Chicken Plan Trust asks the U.S. Bankruptcy Court for the District of Arizona for an order compelling Houlihan Lokey Howard & Zulkin and its attorney of record, Richard A. Chesley, Esq., at Jones, Day, Reavis & Pogue, to produce documents for inspection and copying before the end of the month at the offices of the Plan Trustee's law firm, Lewis and Roca. HLHZ served as the financial advisor the the Official Committee of Unsecured Creditors during Boston Chicken's failed chapter 11 reorganization proceeding. Presumably, Mr. Smith is gathering evidence to challenge the millions of dollars in fees HLHZ has sought payment of from the Boston Chicken Plan Trust set-up under the Debtors' plan of liquidation. But, who knows what might be up Mr. Smith's sleeve. Specifically, Mr. Smith wants to get his hands on: 1. All work product, memoranda and/or any other documents evidencing, referring or relating to the "Advisory Services" performed by Houlihan Lokey for the Official Committee of Unsecured Creditors, including, but not limited to: (a) advising the Committee with respect to the Company's financial condition, business plans, forecasts and related projections; (b) reviewing industry valuation parameters; (c) reviewing various business plans promulgated by Boston Chicken; (d) investigating and providing the Committee with information and analysis regarding the Company's various operational restructuring initiatives; (e) creating and formulating of alternative restructuring scenarios, accompanied by preliminary valuation indications of both the Company and any securities to be issued as a part of restructuring; (f) discussing and negotiating with the Debtor's senior secured lenders and their advisors on potential alternative plans or reorganization; (g) analyzing the economic impact of assuming/rejecting various contracts; (h) advising the Committee in connection with a possible sale transaction involving the sale of the business or assets of the Debtor; (i) advising the Committee as to the financing alternatives in connection with various plans of reorganization; (j) attending numerous meetings, participating in conference calls, and having numerous discussions with the Debtor and its advisors, the Debtor's senior secured lenders and their advisors, and several other (k) providing the Committee with various industry, comparable company and competitor analyses; (l) engaging in discussions with parties interested in financing or acquiring the Company; and (m) performing such additional advice and assistance as the Committee requested from time to time. 2. All time records for all Houlihan Lokey personnel who performed any work for the Committee. 3. All work product, memoranda and/or any other documents evidencing, referring or relating to time spent by Houlihan Lokey personnel on work for the Committee. 4. Complete resumes of all Houlihan Lokey personnel who performed any work for the Committee. The resumes should include the number of years each individual has worked at Houlihan Lokey as well as a start date for each individual. 5. Copies of receipts for all expenses claimed by Houlihan Lokey. 6. All work product, memoranda and/or any other documents evidencing, referring or relating to the expenses claimed by Houlihan Lokey. BRIGGS & STRATTON: S&P Lowers Ratings to BBB- From BBB+ ------------------------------------------------------- Standard & Poor's lowered its long-term corporate credit, senior unsecured debt, and preliminary shelf ratings for Briggs & Stratton Corp. to triple-'B'-minus from triple-'B'-plus, as well as its short-term corporate credit and commercial paper ratings to 'A-3' from 'A-2'. The single-'B'-minus corporate credit and triple-'C' subordinated debt ratings for Generac Portable Products Inc., and single-'B'-minus corporate credit and senior debt ratings for Generac Portable Products LLC have been withdrawn. All ratings for Briggs & Stratton and Generac have been removed from CreditWatch, where they were placed on March 1, 2001 and April 27, 2001 (new Briggs & Stratton senior notes). Standard & Poor's has also withdrawn its triple-'B'-plus rating on Briggs & Stratton's $140 million 364-day credit line, which has been canceled. A complete list of ratings is available on RatingsDirect, Standard & Poor's on-line credit research service, or by calling the Standard & Poor's ratings desk at (1) 212-438-2400. The outlook is negative. About $449 million of total debt was outstanding at Briggs & Stratton on April 1, 2001. The downgrade follows Briggs & Stratton's May 15, 2001 closing of its acquisition of Generac for $270 million, as well as an earnout provision. The acquisition was largely debt-financed, and the resulting large increase in leverage has weakened Briggs & Stratton's historically strong credit measures. Generac has become a guarantor of all existing and new debt at Briggs & Stratton. Generac's credit facilities have been canceled subsequent to the repayment of all of its outstanding debt at closing by Briggs & Stratton. Briggs & Stratton is the world's largest producer of air-cooled gasoline engines used for mass-merchandised lawn and garden power equipment. The company's market share is strong, with an estimated 45%-50% share of the worldwide market for 3 horsepower (hp)-25hp engines, and inclusion of its engines in excess of 50% of all residential lawn mowers in the U.S. However, the company's end markets are mature and competitive and the business is highly seasonal. Generac is a leading manufacturer of portable generators and pressure washers for use in industrial and residential applications. The acquisition will provide Briggs & Stratton with two new product lines, as well as entry into the consumer-end product market in the power department. However, purchases of generators and power washers are somewhat discretionary, and generator purchases are tied to severe weather, which will add some volatility to Briggs & Stratton's average business profile. Although Generac gained market share in 2000, the company's financial performance weakened because of inventory buildup at its retail customers and lack of severe storm activity. Future growth of the generator market is expected to come from further household penetration. Pro forma for the acquisition, Standard & Poor's estimates Briggs & Stratton's fiscal year-end debt levels will grow to about $550 million from about $160 million at fiscal year-end July 2, 2000. As a result, leverage will increase significantly with estimated pro forma total debt to capital of about 55% as compared to 28% at July 2, 2000. Operating performance at Briggs & Stratton had weakened in the first nine months of fiscal 2001 with a more than 40% decline in EBITDA versus the same prior year period. This decline was due to a 7% decline in engine unit sales resulting from reduced demand following a period of engine shortages in 1998-1999, an unfavorable mix change to lower margin, lower hp units, and the impact of a weak euro. The combination of soft performance at both Briggs & Stratton and Generac, in addition to the increased debt levels will substantially weaken credit measures. Pro forma for the acquisition, Standard & Poor's estimates EBITDA to interest will decline to under 5 times (x), compared to coverage of 7.0x for the last 12 months ended April 1, 2001, and 12.8x for fiscal year-end 2000. Standard & Poor's will expect the company to sustain EBITDA coverage in the 4.5x area in order to maintain the new triple-'B'-minus rating. Some financial flexibility is provided by the company's $250 million multi-currency credit agreement. Outlook: Negative The outlook reflects Standard & Poor's uncertainty about whether or not Briggs & Stratton will be able to maintain credit measures appropriate for the revised rating. BROADBAND OFFICE: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Broadband Office, Inc. 951 Mariner's Island Blvd., Suite 700 San Mateo, CA 94404 Chapter 11 Petition Date: May 9, 2001 Court: District of Delaware Bankruptcy Case No.: 01-01720 Debtor's Counsel: David B. Stratton Esq. Pepper Hamilton LLP 1201 N. Market Street, Suite 1600 Wilmington, DE 19801 (302) 777-6566 Estimated Assets: $10 Million to $100 Million Estimated Debts: $10 Million to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ UUNET Goods/services $1,813,020 22001 Loudoun County Parkway Ashburn, VA 20147 Accenture LLP Goods/services $1,727,878 PO Box 70629 Chicago, IL 60673-0629 Extreme Networks Credit Co Goods/services $1,297,318 Attn: Accounts Receivable 3585 Monroe St. Santa Clara CA 95051 Hugh O'Kane Electric Co., Goods/services $1,265,395 LLC Attn: Cindy 88 White Street New York, NY 10013 Amerilink Corp dba NACOM Goods/services $1,243,825 Attn: Doug Hyde 6525 W. Campus Oval New Albany OH 43054 Communication Tech Services Goods/services $823,435 PO Box 1032 Northborough MA 01532 Portal Software, Inc. Goods/services $795,472 Attn: Chanel 198 Van Buren Street Suite 110 Herndon VA 20170 Braun Consulting Goods/services $793,762 Attn: Lora Ketchum 30 West Monore Street Suite 300 Chicago, IL 60603-2401 Fisk Technologies Goods/services $660,541 Attn: Jackie 111 TC Jester Street Houston, TX 77007 Idea Integration Goods/services $643,319 PO Box 281627 Atlanta, GA 30384-1627 Williams Communications Goods/services $568,035 Solutions, LLC Attn: Linda Scheidle 21398 Network Place Chicago, IL 60673-1213 Tiara Networks Goods/services $546,410 Attn: Lorie Astwood 529 Race Street Suite 100 San Jose, CA 95126 Broadbay Networks Goods/services $527,449 Attn: Chuck Anderson 370 7th Street Attn: A/R San Francisco, CA 94103 Halloran Robertson & Assoc Goods/services $509,515 One Almaden Blvd., 5th Floor San Jose, CA 95113-2214 The Fishel Company Goods/services $390,100 Attn: Joseph Mayhew PO Box 710746 Columbus, OH 43271-0746 HG Global Workplaces, Inc. Goods/services $390,000 HQ Sacramento, 16th Floor 980 Ninth Street Sacramento, CA 95814-2736 Oracle Corporation Goods/services $375,301 Attn: Lily K. Hao PO Box 71028 Chicago, IL 60694-1028 Proctor Electric Goods/services $367,287 Attn: Ed Howell 4483 Lottsford Vista Road Lanham Seabrook MD 20706 Dell Goods/services $353,124 Attn: John Grey PO Box 120001 Dept. 0680 Dallas TX 75312-1680 Brobeck, Phleger & Harrison Goods/services $324,554 12390 El Carmino Real San Diego, CA 92130 CALYPTE BIOMEDICAL: Shares Face Delisting From Nasdaq ----------------------------------------------------- Calypte Biomedical Corporation (Nasdaq: CALY) announced that it was notified by Nasdaq that the Nasdaq staff had reached a determination to delist Calypte's common stock from the Nasdaq SmallCap Market. Nasdaq's decision to delist Calypte's common stock was based on Nasdaq Marketplace Rule 4310(c)(2)(B) and results from Calypte's failure to meet the three criteria relating to net assets, market capitalization or net income. Calypte has requested an oral hearing to review Nasdaq's determination. The hearing request stays the delisting of Calypte's common stock, which otherwise would have occurred on May 21, 2001, pending the decision of a Nasdaq Listing Qualifications Panel. There can be no assurance that the decision of the Nasdaq Listing Qualifications Panel will be favorable to Calypte. If Calypte's common stock is delisted following the hearing, the Company's shares would likely trade over the counter. Additionally, the Company's continued ability to use its equity line of financing facility is dependent upon its continued listing on the Nasdaq SmallCap Market and any outstanding balance on its 6% convertible debenture would become due and payable should the delisting occur. Calypte's President, CEO and CFO, Nancy Katz, stated, "We previously announced this possible action by Nasdaq a month ago, and this determination letter from the Nasdaq staff is one more step in the delisting process. While there can be no assurance that the Listing Qualifications Panel will grant the company's request for continued listing on the Nasdaq National Market, we will continue to pursue all available means to maintain this listing in concert with our active search for strategic opportunities including investment in the Company, a merger or other comparable transaction, the sale of certain of our assets or a financial restructuring to sustain our operations. While some of these opportunities are promising, we do not have any agreements in place." Calypte Biomedical Corporation (Nasdaq: CALY) headquartered in Alameda, California, is a public healthcare company dedicated to the development and commercialization of urine-based diagnostic products and services for Human Immunodeficiency Virus Type 1 (HIV-1), sexually transmitted diseases and other infectious diseases. Calypte's tests include the screening EIA and supplemental Western Blot tests, the only two FDA-approved HIV-1 antibody tests that can be used on urine samples. The company believes that accurate, non-invasive urine-based testing methods for HIV and other infectious diseases may make important contributions to public health by helping to foster an environment in which testing may be done safely, economically, and painlessly. Calypte sells its products in over 40 countries worldwide through international distributors and strategic partners. CASTLE DENTAL: Taps Haynes & Boone As Counsel In Restructuring -------------------------------------------------------------- Castle Dental Centers, Inc. announced that earnings before interest, taxes, depreciation and amortization ("EBITDA"), excluding restructuring costs and the cumulative effect of adopting a change in accounting principle, was $4.1 million, an increase of 14% over the first quarter of 2000. Operating income of $2.4 million, excluding the impact of restructuring costs of $0.5 million, increased by 19% over the same period last year. EBITDA margin, excluding the restructuring charge and accounting change, was equal to nearly 15% of net patient revenues for the first quarter of 2001. The Company reported a net loss of $541,000, or $(0.08) per share, for the first quarter of 2001 compared to net income of $312,000, or $0.05 per share, in the prior year period. Net income was impacted by restructuring costs, increased interest expense of $713,000 (of which $425,000 resulted from the accrual of default interest and swap interest expense), and $250,000 representing the cumulative effect of adopting accounting principle SFAS 133 concerning the accounting treatment for derivative instruments and hedge agreements. Excluding restructuring costs, accrued default interest, and the effect of the accounting change, net income would have been $0.5 million, or $0.08 per share, for the first quarter 2001. Net patient revenues were $27.7 million for the first quarter of 2001, an increase of 4.5% over first quarter 2000 revenues of $26.5 million, and 7.8% above fourth quarter 2000 revenues of $25.7 million. Patient revenues from dental centers open more than one year increased by 6.1% in the first quarter of 2001 compared to the same period last year. During the month of March the Company began to implement a restructuring plan. The implementation of this plan continues on a going forward basis. The restructuring plan was developed by Getzler & Company, a New York based management consultant and restructuring firm, in conjunction with Company management. The plan was presented to the Company's board of directors and senior bank lending group in February 2001. In conjunction with the adoption of the plan, Ira Glazer, Senior Vice President of Getzler & Company, was appointed interim chief executive officer of the Company as of March 1, 2001. Mr. Glazer commented, "We are satisfied with the results of the first quarter. We are encouraged by our progress in exceeding the expectations of the restructuring plan. The Company has reorganized management, both at the field and corporate levels. We have added personnel and continue to implement new procedures and reports to control and improve our collections of accounts receivables. We have realigned our marketing and advertising programs; and, eight under-performing dental centers have been closed across the country. While there are risks inherent in any restructuring plan, we remain hopeful that the continued implementation of the plan will generate improved financial performance going forward." Glazer continued, "We continue to negotiate with our senior lenders to achieve an acceptable forbearance agreement. To assist the Company in negotiation of this matter we have engaged Haynes & Boone, LLP as legal counsel. Although there can be no assurance given as to the ultimate success of these negotiations, management believes it is reasonable to assume that the Company will receive a forbearance agreement from its lenders." Castle Dental Centers, Inc. develops, manages and operates integrated dental networks through contractual affiliations with general, orthodontic and multi-specialty dental practices in the U.S. The Company presently manages 93 dental centers with approximately 200 affiliated dentists in Texas, Florida, Tennessee and California. CASUAL MALE: Denies Bankruptcy Reports -------------------------------------- Casual Male Corp. said that rumors claiming that the men's clothing retailer will shortly file for chapter 11 bankruptcy protection are "just speculation," according to Dow Jones. On Tuesday, the Boston Globe reported that Casual Male might have to seek bankruptcy protection, citing its inability to file its fiscal 2001 annual report on time with the Securities and Exchange Commission. The Canton, Mass.-based company said that it was negotiating "significant" new market transactions, which, if not consummated, may affect the company's financial results. Steven Bowles, an investor relations spokesman, said that the company continues to seek new sources of capital in the form of debt or equity, or both. (ABI World, May 16, 2001) CT HOLDINGS: Shares Knocked off Nasdaq, Now Trading On OTCBB ------------------------------------------------------------ CT Holdings, Inc. (Nasdaq: CITN) announced that on May 16, 2001, it received a Nasdaq Staff Determination indicating the Company's securities would be delisted from The Nasdaq National Stock Market, and would trade on the OTC Bulletin Board effective with the open of business on May 17, 2001 under the same symbol - CITN. The Company previously announced that it had received a Nasdaq Staff Determination indicating the Company no longer complied with the continued listing requirements of The Nasdaq Stock Market, and that its securities were therefore subject to being delisted from the Nasdaq National Market. The Company exercised its right to appeal the Staff Determination and requested a hearing before a Nasdaq Listing Qualifications Panel. The hearing occurred on April 16, 2001 and today's Nasdaq Staff Determination was the culmination of this hearing. Nasdaq has advised CT Holdings that the Nasdaq Listing and Hearing Review Council may, on its own motion, determine to review any Panel decision within 45 calendar days after issuance of the written decision. If the Listing Council determines to review this decision, it may affirm, modify, reverse, dismiss, or remand the decision to the Panel. The Company will be immediately notified in the event the Listing Council determines that this matter will be called for review. The Company may also request that the Listing Council review this decision. The request for review must be made in writing and received within 15 days from the date of this decision. The institution of a review, whether by way of the Company's request, or on the initiative of the Listing Council, will not operate as a stay of this decision. The Company plans to request a review of the decision within the 15 day period. CT Holdings, Inc. (NASDAQ: CITN), is a developer of early stage companies, including Parago, Inc. and River Logic. For more information on CT Holdings, our Internet holdings, and our Citadel Technology line of security software products, please visit our Web site at www.ct-holdings.com. DERBY CYCLE: S&P Cuts Long-Term, Bank Loan Ratings to D From CCC ---------------------------------------------------------------- Standard & Poor's lowered its long-term corporate credit and bank loan ratings on the U.K.-based bicycle manufacturer Derby Cycle Corp. to 'D' from triple-'C'. At the same time, the senior unsecured debt ratings on Derby and related entity Lyon Investments B.V. were lowered to 'D' from double-'C'. These rating actions follow the company's announcement that it will not be making the scheduled interest payment for May 15, 2001, on both the $100 million 10.0% senior notes issue due 2008 and the DM110 million ($53 million) 9.375% senior notes issue due 2008. The company is also in default of the covenants on the outstanding amount of its senior secured revolving credit facility, and it is unlikely that the interest payment will be met within the 30-day grace period on the notes. Derby has been under significant financial pressure for the last few months, following deterioration in its operating performance in fiscal 2000. Despite having restructured the $30 million working capital requirement for its quarter-one 2001 manufacturing operations at the end of 2000, the company has found its financial resources insufficient to continue servicing the existing debt. Derby is currently negotiating the restructuring of its outstanding securities with an informal committee of bondholders, Standard & Poor's said. DOLPHIN TELECOM: Says It May Not Be Able To Pay Debts This Year --------------------------------------------------------------- Dolphin Telecom plc, a subsidiary of Telesystem International Wireless Inc. (NASDAQ: TIWI) (TSE: TIW.), reported its results for the first quarter ended March 31, 2001. Highlights For the first quarter ended March 31, 2001, all amounts are in US$, unless otherwise stated - As of March 31, 2001, 61,900 ESMR subscribers were connected to Dolphin's Enhanced Specialized Mobile Radio (ESMR) networks. As previously announced, Dolphin had a lower connection rate than expected during the first quarter. Net ESMR subscriber additions in the first quarter of 2001 were 10,400. Dolphin expects to increase the rate of subscriber additions starting at the end of the second quarter of 2001, following the introduction of new generation handsets from Nokia and Motorola. In association with the availability of the new handsets Dolphin will implement a new marketing campaign offering an expanded choice of services and tariffs packages to customers. - Total service revenues were $19.9 million for the three- month period ended March 31, 2001, compared to $19.7 million for the corresponding period of 2000. Service revenues from the increase in ESMR subscribers were to a large extend offset by the anticipated decline in the Specialized Mobile Radio (SMR) customer base. Equipment revenues stood at $3.9 million for the first quarter of 2001, compared to $1.9 million for the corresponding period of 2000. The increase in revenues reflects the increase in gross additions as a result of ESMR promotional activities in the United Kingdom (U.K.). - Operating loss before depreciation, amortization and impairment of long-lived assets was $52.4 million for the three- month period ended March 31, 2001, while it stood at $38.1 million for the corresponding period of 2000. The launch of commercial ESMR services in the United Kingdom and in France as well as continued ESMR network build-out efforts contributed to the increased operating losses. - In France, following the launch of pilot commercial ESMR services in the regions of Nord/Pas-de-Calais and Rhone-Alpes in the fourth quarter of 2000, service was launched in the regions of Provence/Cote d'Azur and Paris in the first quarter of 2001. - At the end of the first quarter in 2001, Dolphin announced revised business plans to focus efforts and resources on its more mature markets of the U.K. and France. The revised business plans are designed to reduce costs and will result in delays to operational activity in Germany and Belgium and a reduction in the company's workforce of up to 600 positions. In the first quarter of 2001, the Company recorded a charge of $264.8 million for impairment in long-lived assets in countries where ESMR services have not yet been launched. - The net loss in the first quarter of 2001 was $325.0 million, compared to a net loss of $81.0 million for the corresponding period of 2000. The net loss for the quarter was negatively effected by higher financing costs, which were partly offset by a foreign exchange gain of $22.6 million. The increase in net loss is mainly attributable to an impairment provision of $240 million, net of tax effect, taken against certain long- lived assets in countries where services were not yet launched. - During the quarter, Dolphin Corporation Limited (a direct wholly- owned subsidiary of Dolphin Telecom plc) borrowed 106.4 million pounds sterling ($154.4 million) from its principal shareholder, TIW. In December 2000, TIW indicated its intention to provide financial assistance of up to $300 million in convertible loans to support Dolphin's growth in 2001, based on the achievement of technological, operational and financial milestones. - As previously announced, Dolphin has initiated a process of seeking external financing, including by way of strategic partnerships; Dolphin does not expect an outcome to this process until the third quarter. If Dolphin were unable to obtain additional financing and to refinance or amend the terms of its current credit facilities, its ability to meet its obligations over the next 12 months would be uncertain. As of March 31, 2001, Dolphin reached 61,900 ESMR (Enhanced Specialized Mobile Radio) subscribers in the United Kingdom and France. During the first quarter, the Company added 10,400 net ESMR subscribers, approximately 4,500 below management's internal expectations at the beginning of the year. As previously announced, connection rates in the first quarter of 2001 have run at a lower level, reflecting the traditional weakness of the first quarter and problems encountered in the supply chain for vehicular adaptors (car kits). Normal volumes and supply have been restored since April and the Company expects second quarter net additions in the United Kingdom of approximately 12,000 subscribers. Marketing and promotional efforts are being focused around the commercial introduction of a new generation of handsets towards the end of the second quarter. In conjunction with the availability of the new handsets, Dolphin will implement a new marketing campaign offering an expanded choice of services and tariff packages to customers. Dolphin expects the rate of ESMR subscriber additions to increase with the commercial launch of the new handsets and offerings and accordingly maintains its net subscriber additions target of 100,000 for the year. ESMR new generation handsets from Nokia and Motorola have been received by Dolphin and are currently being tested extensively in preparation for commercial launch. "The first quarter of 2001 represents a slowing of the rate of net subscriber additions compared to the last quarter of 2000, but nevertheless we have continued to make significant headway in the mobile business market. We signed up significant customer wins in the quarter, including KLM Ground Services and WHSmith News, and in the last month have continued to add new large corporate accounts, such as Woolworths in the U.K. and Societe des Autouroutes Paris-Rhin-Rhone (SAPRR) in France. In the U.K., we are now scaling up our distribution channels and finalizing our marketing plans in preparation for the launch of new lighter and slimmer handsets this summer. With the benefits of new handsets, increased sales channels and strong marketing promotions, we will aggressively pursue new business accounts in the second half of 2001," said Steven Evans, Chief Executive Officer. "During the first quarter we took deliberate actions to focus our efforts and resources on our most mature markets of the U.K. and France and I am confident our performance in the second half of the year will demonstrate increased market penetration of our ESMR services in these primary countries, particularly in the U.K.", added Mr. Evans. Dolphin has set a target for ESMR subscriber growth in the United Kingdom in 2001 of 100,000 subscriber additions to reach 150,000 by year-end. This objective takes into account the current size of the addressable market while considering the availability of a new generation of handsets. In addition to being significantly lighter in weight, these handsets are expected to feature a slimmer form factor, longer battery life and higher voice quality. The new handsets will also feature enhanced functionalities for improved text messaging and better designs for packet data transmission services to be introduced at the end of this year or the start of 2002. Given the sales cycles in the business market, Dolphin expects the impact of the new generation of handsets on subscriber growth to be reflected in the second half of 2001. In France, Dolphin introduced pilot commercial ESMR services in the regions of Nord/Pas-de-Calais and Rhone-Alpes in the fourth quarter of 2000, and in the regions of Provence/Cote d'Azur and Paris in the first quarter of 2001. Dolphin will continue to build-out and densify its network in these four regions, but the introduction of commercial ESMR services in four additional regions scheduled for the second half of 2001 will be delayed until the first half of 2002. Dolphin will continue to market and commercialize its ESMR services on a regional basis during 2001. During the first quarter of 2001, Dolphin announced actions to reduce costs and concentrate its efforts and financial resources on its United Kingdom operations and the four regions of France in which it offers ESMR services. Capital spending has been scaled back in other regions of France as well as in Germany and Belgium and the total Dolphin workforce is being reduced by up to 600 positions, mainly in Germany. As a result of the changes in its business plan, Dolphin has provided for impairment in the value of certain long-lived assets in countries where ESMR services will be curtailed or delayed. In aggregate, $264.8 million has been expensed in the first quarter of 2001, before deduction of $24.8 million for deferred income taxes. This write-down is a non-cash expense. In Germany, Dolphin intends to switch on its ESMR network at the end of June 2001, as scheduled in the four main economic regions of Berlin, Frankfurt, Hamburg and Rhein-Ruhr. However, Dolphin will not introduce full commercial ESMR services in these regions or continue to build-out its ESMR network in other regions in 2001. The network is intended to be used to pilot commercial ESMR services for the first time in Germany. Dolphin closed the first quarter of 2001 with a total subscriber base of 268,000 at March 31, 2001, compared to 273,500 at December 31, 2000. Total Specialized Mobile Radio (SMR) subscribers were 206,100 at March 31, 2001, a net decline of 15,900 subscribers, compared to 222,000 as of December 31, 2000. Review of Operations Total service revenues were $19.9 million for the three-month period ended March 31, 2001, compared to $19.7 million for the corresponding period of 2000. Service revenues have been negatively affected by the anticipated decline in the SMR customer base, which was not totally offset by the increase of ESMR subscribers. ESMR ARPU stood at $42 for the quarter, a 5% increase over the previous quarter, the main contributor to the increase has been a higher level of calls outside the Dolphin network (PSTN). Equipment revenues stood at $3.9 million for the first quarter of 2001, compared to $1.9 million for the corresponding period of 2000. The increase in revenues reflects the increase in gross additions as a result of ESMR promotional activities in the United Kingdom. Cost of equipment amounted to $11.8 million for the three-month period ended March 31, 2001, compared to $6.9 million for the corresponding period of 2000. The increase in cost of equipment reflects the Company's policy on subsidy. Cost of services amounted to $26.6 million for the three-month period ended March 31, 2001, compared to $22.4 million for the corresponding period of 2000. The negative margin on services for the first quarters of 2001 and 2000, is mainly attributable to the launch of ESMR services in the United Kingdom and France, and a declining SMR subscriber base. A negative margin is expected in the following quarters until the Company reaches a critical mass of ESMR subscribers to cover the fixed cost of operating its ESMR networks. Selling, general and administrative expenses increased by $7.3 million to reach $37.7 million in the first quarter of 2001 when compared to the corresponding period of 2000. Increased selling and marketing activities in the United Kingdom for ESMR services and regional selling and marketing activities in France for the launch of commercial ESMR services are the main contributors for the increase. Operating loss before depreciation, amortization and impairment of long-lived assets was $52.4 million for the three-month period ended March 31, 2001, compared to $38.1 million for the corresponding period of 2000. The launch of commercial ESMR services in the United Kingdom and in France as well as continued ESMR network build-out efforts contributed to the increased operating losses. Depreciation and amortization amounted to $28.3 million for the first quarter of 2001, compared to $23.7 million for the corresponding period of 2000. The increase is mainly attributable to the increased tangible assets base. During the first quarter, the Company recorded an impairment provision of $240 million, net of deferred income taxes of $24.8 million, against the value of certain long-lived assets in countries where ESMR services were not yet launched. The net loss in the first quarter of 2001 was $325.0 million, compared to a net loss of $81.0 million for the corresponding period of 2000. The net loss for the quarter was negatively effected by higher financing costs, which were partly offset by a foreign exchange gain of $22.6 million. The increase in net loss is mainly attributable to the above mentioned impairment provision. Liquidity and Capital Resources As of March 31, 2001, the Company held cash and cash equivalents of $39.3 million, compared to $62.7 million as of December 31, 2000. The decrease is primarily due to operating expenses and capital expenditures attributable to the build-out of the Company's ESMR networks in the United Kingdom, France, Germany and Belgium and selling and marketing expenses following the launch of ESMR services in the United Kingdom and France, partly offset by the proceeds from a loan from a related party. Cash used in investing activities in the three-month period ended March 31, 2001 amounted to $36.4 million. The Company continued to invest in the acquisitions of tangible fixed assets in relation to the build-out of its ESMR networks and support systems in the United Kingdom, France and Germany. During the quarter, Dolphin Corporation Limited (a direct wholly-owned subsidiary of Dolphin Telecom plc) borrowed 106.4 million pounds sterling ($154.4 million) from its principal shareholder, TIW. In December 2000, TIW indicated its intention to provide financial assistance of up to $300 million in convertible loans to support Dolphin's growth in 2001, based on the achievement of technological, operational and financial milestones. In April 2001, in connection with obtaining a waiver until May 31, 2001 from the fulfillment of certain covenants, Dolphin's $250 million German Credit Facility was reduced to 110 million Euro (96,4 millions $), the amount currently outstanding. Dolphin expects to be in breach of certain covenants relating to this facility in 2001. Dolphin is currently in discussions with respect to these covenants, the outcome of which remains uncertain. The facility is classified as short-term liabilities. During 2000, in connection with obtaining a waiver from the fulfillment of a certain covenant, Dolphin's pounds sterling 215 million ($317 million) United Kingdom bank credit facility was reduced to pounds sterling 64 million ($90.6 million), the amount currently outstanding, and maturity was brought forward to June 30, 2001. Dolphin is currently in discussions with respect to the refinancing of this facility, the outcome of which remains uncertain. The Company's ability to realize its assets and meet its obligations in the normal course of business over the next 12 months is uncertain. Should it be unable to do so, the Company's assets may be impaired by a material amount in addition to the $264.8 million charge recorded in the three-month period ended March 31, 2001. If Dolphin were to be in default of its financial obligations, the repayment of its Senior Discount Notes could be accelerated under cross default provisions. The Company's ability to meet its obligations over the next 12 months is dependent upon obtaining additional financing, as well as refinancing or amending the terms of its current credit facilities. As previously announced, Dolphin has initiated a process of seeking external financing, including by way of strategic partnerships. Dolphin does not expect an outcome to this process until the third quarter. As of March 31, 2001, total assets amounted to $905.0 million with long-term debt (including current maturities and loans due to a related party) of $1,075.3 million. As of March 31, 2001, the Company owed its principal shareholder an aggregate of $331.9 million, including loans contracted in 2000. About Dolphin Telecom plc Dolphin Telecom is building digital ESMR networks in Europe. It began offering national commercial ESMR services in the United Kingdom in the third quarter of 1999, and launched pilot commercial ESMR services, on a regional basis, in France in the fourth quarter of 2000. Dolphin, which groups TIW's SMR and ESMR activities in the United Kingdom, France, Germany, Belgium, Luxembourg, Portugal and Spain, is the largest SMR and ESMR operator in Europe, serving approximately 268,000 subscribers. It holds licenses covering a population of more than 248 million. About TIW TIW is a rapidly-growing, global mobile communications operator with over 4.2 million subscribers worldwide. The Company's shares are listed on the Toronto Stock Exchange ("TIW") and NASDAQ ("TIWI"). In addition to its Dolphin operations, TIW is the strategic partner in two leading cellular operators in Brazil. In Central and Eastern Europe, TIW is a cellular market leader in Romania and launched services in the Czech Republic in March 2000. DOLPHIN TELECOM: Moody's Downgrades Notes' Rating To Ca ------------------------------------------------------- Moody's ratings on Dolphin Telecom Plc's notes fell to Ca from Caa3. Said notes are as follows: - unsecured issuer rating - $263.0 million 11.5% senior discount notes due 2008 - EUR 238.0 million 11.625% senior discount notes due 2008 - $295.0 million 14.0% senior discount notes due 2009 The rating agency also downgraded Dolphin's senior implied rating to Caa3 from Caa1. The ratings remain on negative outlook while approximately $766.5 million of debt securities are affected. Accordingly, the downgrade of the notes reflects Moody's concerns relating to Dolphin's ability to remain as a going concern. Dolphin's survival is said to be dependent upon being able to obtain additional funding as well as refinancing or gaining additional amendments to the terms of its current credit facilities. However, Moody's said Dolphin has extremely limited financial flexibility and little time to manoeuvre. Based in Basingstoke, England, Dolphin is a provider of specialized mobile radio services to mobile workforces, and intends to build a Pan-European digital-enhanced specialized mobile radio network. DYERSBURG CORPORATION: Downsizing Operations To Reduce Costs ------------------------------------------------------------ Dyersburg Corporation (OTCBB: DBGC) announced that it will consolidate and downsize its operations. The Company cited general economic trends and increased competition from abroad as the reasons for its operational changes. The changes will begin to take effect immediately. As part of its strategy to return to profitability, Dyersburg intends to consolidate its textile manufacturing operations to two facilities. The Company also said that it intends to sell its stretch division, United Knitting. The consolidation will not affect its ability to deliver product to customers. As a result of the consolidations, Dyersburg's company-wide workforce will be reduced by approximately 900 employees. The reductions will be from manufacturing, sales and corporate positions. The Company currently employs about 2,100 people. T. Eugene McBride, chairman of the board and chief executive officer of Dyersburg Corporation, said, "For some time now, we have been examining our operations in order to improve our efficiency and remain viable in the current economic conditions. We had hoped to avoid personnel reductions. However, with the downturn in the general economy and increased competition from low-cost producers abroad, we had little choice but to make the difficult decision to downsize our operations. We deeply regret the loss of jobs, but feel that Dyersburg will be better able to remain viable and competitive with this new structure." Dyersburg continues to implement its previously announced restructuring plan and work towards an orderly exit from Chapter 11 protection. The Company said that its restructuring plan was not a factor in the decision to downsize its operations. Trade creditors will continue to be paid and will be unaffected by the operational changes. Dyersburg is one of the largest domestic marketers of circular knit fleece, jersey and stretch knit fabrics. The Company produces fabrics that are used principally for activewear, bodywear, outerwear and various branded sportswear. Dyersburg also operates a garment packaging business with production in the Dominican Republic and Central America. For more information, please visit the Company's web site at www.Dyersburg.com. EDISON INT'L: Board Decides To Eliminate Q2 Dividend Payments ------------------------------------------------------------- The board of directors of Edison International (NYSE: EIX) voted to eliminate payment of the second-quarter dividend on its common stock that customarily would have been paid on July 31, 2001, because of financial conditions created by California's ongoing energy crisis. In addition, Edison International's electric utility subsidiary Southern California Edison Company announced that its board of directors decided to defer the quarterly dividends on SCE's 4.32% series of cumulative preferred stock and its 6.05% and 6.45% series of $100 cumulative preferred stock that would have been payable on June 30, 2001, and on SCE's 7.23% series of $100 cumulative preferred stock that would have been payable on July 31, 2001. The SCE board also decided to continue the previous deferral of quarterly dividends on its preferred stock payable on and after February 28, 2001. Based in Rosemead, Calif., Edison International is a premier international electric power generator, distributor and structured finance provider. With assets of $36 billion and a portfolio of approximately 28,000 MW, Edison International is an industry leader in privatized, deregulated and incentive- regulated markets and power generation. It is the parent company of Southern California Edison, Edison Mission Energy, Edison Capital, Edison O&M Services, and Edison Enterprises. FUTUREONE: Releases Second Quarter Results ------------------------------------------ FutureOne, Inc. (OTC Bulletin Board: FUTO), www.futureone.com, reported second quarter revenues and earnings in its 10-QSB filed with the U.S. Securities and Exchange Commission, www.sec.gov. Ralph R. Zanck, Vice President of Finance stated, "We continue to see the results of our program to divest unprofitable business segments. The operating loss for this quarter was $291,000 compared to over $1,339,000 for the same quarter last year. In addition, general and administrative expenses for the second quarter of fiscal year 2001 were $772,000, compared to $1,147,000 for the second quarter of fiscal year 2000." He also reported, "For the second consecutive quarter the Company had positive EBITDA (earnings before interest, income taxes, and depreciation and amortization). The Company's EBITDA from continuing operations for the second quarter was $74,000." For the quarter ended March 31, 2001, the Company reported revenues from continuing operations of $4,072,000 compared to $3,234,000 for the corresponding period of fiscal year 2000. The net loss for the quarter was $.03 per share compared to a net loss of $.15 per share for the same quarter of fiscal year 2000. For the six months ended March 31, 2001, the Company reported revenues from continuing operations of $7,330,000 compared to $6,895,000 for the corresponding period of fiscal year 2000. The net loss for the first six months of fiscal year 2001 is $.04 per share compared to a net loss of $.18 per share for the first six months of fiscal year 2000. President and CEO, Donald D. Cannella, commented, "We have increased our revenues 25% from the second quarter of fiscal 2000, because we have expanded our capacity to utilize sub- contractors and increased focus on winning bids on medium-sized projects. We believe these strategies will provide an overall increase in revenues and gross margins in the future and we expect future operating results to show continued improvement." About the Company FutureOne, Inc. recently filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. The Company has divested its unprofitable operations and consolidated and down- sized its corporate overhead to allow it to focus totally on providing telecommunications infrastructure installation, and related services, through its wholly owned subsidiary OPEC CORP., www.opeccorp.com. OPEC has not sought protection from its creditors under Chapter 11 and will continue to operate unaffected by the bankruptcy filing. OPEC provides a comprehensive range of telecommunications services, which include the design, engineering, placement and maintenance of aerial and underground fiber-optic, coaxial and copper cable systems for major communications companies, utility providers, and real estate developers in the western United States. OPEC also provides auxiliary services such as, copper and fiber splicing, horizontal drilling and boring, network repair and maintenance, commercial and residential installations, testing, line conditioning and construction management services. GENESIS HEALTH: Seeks Court Nod On Swap Settlement With Citibank ---------------------------------------------------------------- Genesis Health Ventures, Inc. & The Multicare Companies, Inc. sought the Court's approval, pursuant to Rule 9019(a) of the Federal Rules Bankruptcy Procedure, of a Settlement Agreement by and among GHV and Citibank, N.A. to resolve the dispute over Citibank's claim arising from the Bank's exercise of its right to terminate the Citibank Swap Agreements upon the Debtors' default under the Credit Agreement. The Settlement will result in the reduction of Citibank's secured claim in the amount of $28,548,000 to $17,290,962 with the balance of $11,257,038 allowed as an unsecured claim against GHV. The dispute centered upon (1) whether two Supplemental Swap Agreements had been identified in the Original Acceptance Letter for qualification for Interest Rate Hedging Agreements; (2) Market Quotations on the amount of termination obligations under the Citibank Swap Agreements. The Debtors indicated that the Committee and Mellon Bank, N.A., as agent for the Debtors' senior lenders, support the approval of the Settlement Agreement. Background GHV and Citibank were parties to 8 interest rate hedging agreements and related documents in connection with the Fourth Amended and Restated Credit Agreement, dated as of August 20, 1999, by and among the GHV Debtors as Borrowers, Mellon Bank, N.A., as administrative agent (the Agent), certain other agents, and the lender parties. As previously reported, the obligations of the Borrowers under the Credit Agreement are secured by substantially all the property of the Borrowers (the Collateral) pursuant to the terms of collateral documents identified in the Credit Agreement. The Collateral Documents include, but are not limited to, the Fourth Amended and Restated Collateral Agency Agreement, dated as of August 20, 1999, among the Borrowers and Mellon Bank, N.A., in its capacity as administrative agent, synthetic lease facility agent, and collateral agent (the Collateral Agency Agreement). Provision in Credit Agreement for Interest Rate Hedging Agreements (Swap Agreements) The loans to the Debtors under the Credit Agreement bear interest at a floating rate. On the Commencement Date, over $1 billion was outstanding under the Credit Agreement. Inasmuch as minor changes in the floating rate can make significant additional demands on the liquidity of the Debtors, the Credit Agreement requires the Borrowers to maintain certain interest rate hedging agreements, commonly referred to as "swap agreements," to reduce the risks of such interest rate fluctuations. In particular, Section 6.12 of the Credit Agreement requires the existence, at all times, of interest rate hedging agreements that change at least 50% of the floating rate risk under the Credit Agreement to fixed raterisk. As an incentive for a financial institution to provide interest rate hedging agreements on reasonable terms, the Credit Agreement and the related Collateral Documents provide that the obligations of the Borrowers under any "qualifying" interest rate hedging agreements are entitled to be secured by the same Collateral as the obligations under the Credit Agreement. Section 10.13 of the Credit Agreement sets the standard for when an interest rate hedging agreement "qualifies" to share in the Collateral (a Qualifying Interest Rate Hedging Agreement). An interest rate hedging agreement "qualifies" if (i) the Agent gives its written consent and (ii) the party to the proposed Qualifying Interest Rate Hedging Agreement with the Borrowers signs a joinder to the Credit Agreement agreeing to the terms thereof. Under section 2.3 of the Collateral Agency Agreement, a Qualifying Interest Rate Hedging Agreement arises if, inter alia, the party to a proposed Qualifying Interest Rate Hedging Agreement delivers written notice to the Agent that sets forth the following information with respect to the agreement: the notional principal amount, the parties to such agreement, the interest rate payable thereunder, the interest rate paid pursuant to the Credit Agreement and Collateral Documents and the term thereof; along with a certified copy of the Qualifying Interest Rate Hedging Agreement and a statement that by delivering such notice, such counterparty agrees to become a party to the Collateral Agency Agreement, and be bound thereby as a "Swap Party," as that term is defined in the Collateral Agency Agreement. Swap Agreements Between the Debtors and Citibank GHV and Citibank entered into a standard International Swap Dealers Association, Inc. (ISDA) agreement, dated July 15, 1994, that provided the basic terms for the issuance, operation, and termination of interest rate hedging agreements entered thereunder. The 1994 ISDA Agreement was amended and superceded by an updated standard ISDA Agreement, dated September 23, 1998. In accordance with the terms of the ISDA Agreements, GHV and Citibank entered into 8 interest rate hedging agreements. These agreements, which are supplements to, form a part of, and are subject to the ISDA Agreements, are known as "Confirmations" or "Swap Agreements." On March 20, 2000, the following Swap Agreements between GHV and Citibank were outstanding (the Citibank Swap Agreements): 98L050, 98L051, 98L077, 98S059, 98L079, 98L079DN, 98L096, 98L096DN. By letter, dated June 18, 1999, Citibank submitted a list and description of certain of the Citibank Swap Agreements to the Agent for acceptance as Qualifying Interest Rate Hedging Agreements, which the Agent countersigned and returned to Citibank. The Acceptance Letter listed the following Swap Agreements by transaction number: 98L050, 98L051, 98L077, 98S059, 98L079, 98L096. Swap Agreements 98L079DN and 98L096DN became a subject of dispute. Citibank's Termination of the Swap Agreements Under Section 5 of the 1998 ISDA Agreement, Citibank has the contractual right to terminate the Citibank Swap Agreements if an event of default occurs, including an event of default as specified under the Credit Agreement. The interest rates at the time of such a termination (and projections of where interest rates may move in the future) affect whether the Borrowers owe amounts to Citibank or vice versa at the time of termination. The Termination Guidelines provided in the 1998 ISDA Agreement include a requirement that the party exercising its right to termination must seek bids (the Market Quotations) from four independent parties that are in the business of entering into interest hedging agreements (the Reference Market-makers). In March 2000, the Borrowers' failure to make certain interest payments as required under the Credit Agreement constituted an event of default. By letter dated March 24, 2000, Citibank exercised its right to terminate the Citibank Swap Agreements and sought bids from Reference Market-makers to determine the amounts owed under the Swap Agreements. Citibank received bids from three of the four companies it contacted, which is sufficient to calculate a valid Market Quotation under the 'ISDA Agreement'. On March 29, 2000 and April 3, 2000, Citibank sent letters asserting a claim against the Borrowers in the amount of $28,548,000. The claimed amount was based on an analysis of the Market Quotations for the Citibank Swap Agreements provided by the Reference Market-makers. Citibank also asserted that the claimed amount was entitled to share in the Collateral. After the Commencement Date, Mellon Bank, N.A. filed a proof of claim dated December 12, 2000 on behalf of, inler alia, Citibank in the Debtors' chapter 11 cases for amounts owed by the Borrowers due to the termination of the Citibank Swap Agreements. Dispute Between the Debtors and Citibank By letter dated May 11, 2000, the Borrowers informed Citibank that with respect to the termination of the Swap Agreements, they believed Citibank did not meet certain procedures outlined in the Termination Guidelines. Furthermore, the Borrowers stated there were a number of unresolved issues with respect to the existence and magnitude of the claims asserted by Citibank. By letter dated June 2, 2000, (the Supplemental Letter), and in order to supplement the Acceptance Letter, Citibank provided the Agent with the description of two Swap Agreements which had not been listed or described in the original Acceptance Letter (the Two Supplemental Swaps) identified as transaction numbers 98L079DN and 98L096DN. (A) Contention over the Two Supplemental Swaps The Borrowers contend that the Two Supplemental Swaps, identified in the Supplemental Letter, did not become Qualifying Interest Rate Hedging Agreements because they were not identified in the Acceptance Letter. Citibank asserts that all the Citibank Swap Agreements, including the Two Supplemental Swaps, were identified in the Acceptance Letter. In particular, Citibank maintains that the Two Supplemental Swaps were derivatives of two swaps listed in the Acceptance Letter, and that the Supplemental Letter merely clarified their contention. Thus, Citibank maintains that all the Citibank Swap Agreements, including the Two Supplemental Swaps, were Qualifying Interest Rate Hedging Agreements and that the claims asserted due to their termination are secured. (B) Contention over Market Quotations As a check on the Market Quotations furnished by Citibank and in anticipation of litigation with Citibank, attorneys for the Borrowers retained Deloitte & Touche LLP to provide an analysis of the amount of termination obligations under the Citibank Swap Agreements. Attorneys for the Borrowers provided D&T with the same materials sent by Citibank to the Reference Market-makers. D&T's analysis confirmed the magnitude of the amounts asserted by Citibank, although its quotes in the aggregate were approximately 13% lower. The Settlement Agreement In order to resolve the disputes, GHV and Citibank proposed to enter into the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, the Debtors and Citibank agree that: -- the Two Supplemental Swaps are not secured by the Collateral; -- for purposes of calculating the amount of the termination claims of the Citibank Swap Agreements that are secured by the Collateral, the quotations provided by D&T would be used as if D&T was the fourth Reference Market-maker. Accordingly, the formula in the 1998 ISDA Agreement results in a total secured claim of $17,290,962. The balance of $11,257,038 will be an allowed unsecured claim against GHV, the parties agree. (Genesis/Multicare Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) GTC TELECOM: Needs More Funds To Continue As A Going Concern ------------------------------------------------------------ GTC Telecom Corporation has negative working capital of $5,386,310, liabilities from the underpayment of payroll taxes, contingent liabilities from cancelled contracts, a stockholders' deficit of $5,097,168, losses from operations through March 31, 2001 and a lack of operational history, among other matters, that raise substantial doubt about its ability to continue as a going concern. The Company hopes to continue to increase revenues from additional revenue sources and increase margins as a result of amending its contract with MCI/WorldCom and other cost cutting measures. In the absence of significant revenues and profits, the Company intends to fund operations through additional debt and equity financing arrangements which management believes may be insufficient to fund its capital expenditures, working capital, and other cash requirements for the fiscal year ending June 30, 2001. Therefore, the Company may be required to seek additional funds to finance its long-term operations. The successful outcome of future activities cannot be determined at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. HARNISCHFEGER: Resolves Claim Dispute with NatWest Bank ------------------------------------------------------- Smoothing-out one more bump in the road to confirmation of its Plan, and in order to resolve any remaining issues over the matter, Harnischfeger Industries, Inc. and Westminster Bank PLC presented for the Court's approval a proposed Stipulation and Order form which essentially represents the parties' agreement to the proposed treatment of the Barclays Claim as provided in the Debtors' Third Amended Joint Plan of Reorganization, as at the date the parties entered into the stipulation. The Debtors' Third Amended Joint Plan comes after a series of events and a Prior Stipulation regarding the Westminster Claim. It provides that: (a) the Stipulated Westminster Claim is to be expunged as against HII and (b) the Guarantee and Modified Financing Guaranty are to remain in full force and effect as against New HII post confirmation, consistent with the Prior Stipulation; NatWest's Claim re Revolving Credit Agreement and Guarantee On or about February 24, 2000, NatWest filed an unsecured claim in the amount of $96,947,533 (the Westminster Claim) which was comprised of two components: (1) a claim in the amount of $16,794,364 under the $500,000,000 Revolving Credit Agreement with the Chase Manhattan Bank as Administrative Agent the NatWest/Chase Claim) and (2) a claim in the amount of $80,153,169 on account of the Guarantee by which HII guaranteed payment to NatWest of the liabilities of certain of HII's affiliates (Beloit Walmsley Limited, Harnischfeger Industries Limited, Harnischfeger (UK) Limited, Joy Mining Machinery Limited and, in relation to amounts incurred before March 30, 1998, Morris Mechanical Handling Limited), with a limit on the amount recoverable of a sum not exceeding Sterling 80,000,000 plus accruing interest, costs and expenses. The Westminster/Chase Claim was deemed timely filed and allowed pursuant to a stipulation between HII and Chase Manhattan Bank, on account of the Revolving Credit Agreement. The Guarantee had an expiry date of August 31, 1999, but upon two extensions, has been extended until June 30, 2002. NatWest and HII's non-debtor affiliates subsequently executed documentation for Modified Financing, the effectiveness of which was contingent upon, among other things, the provision by HII of a guarantee of the same in the form of a supplemental guarantee. Accordingly, HII sought and obtained the Court's authority to provide the Modified Financing Guarantee. Prior Stipulation re Westminster Claim In its Thirty Second Omnibus Objection to Claims, HII asserted an objection to the NatWest Claim in the amount of $96,947,533 on the grounds that the claim is allegedly contingent and not allowable under Section 502(e)(1)(B) of the Bankruptcy Code. HII and NatWest resolved the Claims Objection by means of a Stipulation and Order. The Prior Stipulation provided, among other things, that: (A) the Stipulated NatWest Claim, in the amount of $80,153,169 or such other amount representing HII's obligations to NatWest under the Guarantee would be deemed a contingent claim against HII. (B) in the event of the occurrence of one or more Triggering Events, (i) the designation of the Stipulated NatWest Claim as "contingent" would automatically, and without further Order of the Court or action by any party, be vacated, and be of no force or effect; and (ii) the Stipulated NatWest Claim would be deemed allowed in an amount equal to HII's obligations to NatWest under the Guarantee, as of the occurrence of such Triggering Event. (C) in the event the Court authorized HII to issue a Modified Financing Guarantee, and HII issues such guarantee in the form and substance required by the Modified Financing, and conditioned upon the Modified Financing becoming effective, then, notwithstanding anything to the contrary set forth in the Prior Stipulation, the Stipulated NatWest Claim would be in the amount of $80,153,169 or in such other amount representing HII's obligations to NatWest under the Guarantee and/or the Modified Financing Guarantee. The Third Amended Plan of Reorganization After filing their Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, in preparation for the hearing on confirmation of the Plan, and in order to resolve any remaining issues over the matter, the Debtors have requested Barclays to enter into the current Stipulation. In this Stipulation, the parties, with the intention to be legally bound, but subject to approval of the Court, stipulated and agreed that: "Upon the effective date of the Plan, the Stipulated NatWest Claim (claim no. 6710) shall be deemed expunged in its entirety. Notwithstanding the stipulation or anything to the contrary set forth in the Bankmptcy Code, the Plan or in applicable law, the Guarantee and Modified Financing Guanranty sha11 remain in full force and effect as against New HII on and subsequent to the effective date of the Plan and shall be fully enforceable in accordance with their terms." HII shall use its best efforts to obtain (a) Court approval of [the] Stipulation on or prior to the hearing on confirmation of the Plan and (b) an order confirming the Plan which expressly refers to [the current] Stipulation and is consistent in all respects with this Stipulation. [The currrent] Stipulation shall not in any way be deemed to modify or amend the Prior Stipulation, which shall remain in full force and effect." [The] Stipulation shall be governed by and construed and enforced in accordance with the bankruptcy laws of the United Siates and the laws of the State of Delaware, without regard to choice of law principles." (Harnischfeger Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) HUNGRY MINDS: Posts $8MM Loss & Confirms Plan to Sell Business -------------------------------------------------------------- Details to Hungry Minds, Inc.'s (Nasdaq: HMIN) Second Quarter, 2001 report are as follows: -- The Company announced a 32% Q2 revenue decline versus year ago and net loss of $8.0 million ($0.54 per share); -- It is projected the Company will realize a 30% improvement to its previously announced $10.0 million cost savings; -- $43.8 million net revenue performance is $20.8 million lower than prior year and below management expectations. Tech and Consumer gross profit margins decline in Q2 to 21.2% on a consolidated basis from 45.6% a year ago. The sequential decline from 36.5% margin in Q1 is due to a compounding effect of soft re-order patterns from major channels resulting from the continued erosion of the general economy and increased returns, pulping and fixed cost deleveraging. Several key accounts have informed the Company of significantly lower foot traffic in their stores, a decline in new store openings and an increase in store closings; - Q2 Technology and Consumer net revenue is $22.4 million and $21.4 million, respectively. (60% of the total decline from year ago comes from Tech titles.); - Net sales of Dummies Consumer titles increase 11% over prior year, based on brand extension in the travel category; -- SG&A declines by $6.4 million to $12.0 million. Improvements are related to the restructuring; -- Restructuring and impairment charges of $5.1 million are recorded during the quarter. $2.7 million of the charge relates to lease, leasehold improvements and severance expenses. The $2.4 million write-down of HMI intangibles is recorded as an impairment charge; -- Depreciation and amortization expense increases by $0.9 million to $2.3 million. The increase is attributable to the HMI acquisition and leasehold improvements; -- Interest expense is $3.0 million. The $1.4 million increase is driven by the Company's higher debt balance and a market valuation loss on an interest rate derivative; -- EBITDA after restructuring and impairment charges for Q2 is ($7.8) million, down from $10.9 million a year ago; -- Net cash from operations for the six months ended March 31 increase by $8.0 million from ($7.1) million in Q2 '00 to $0.9 million in Q2 `01; -- Daily cash management processes introduced and treasury management services moves to J. P. Morgan Chase & Co.; -- DSO (days sales outstanding) improved by 7 days to 97 days at quarter end versus same period a year ago; -- The Company announced in an 8K filing on May 10, that it has agreed on the terms of a Forbearance and Amendment Agreement with its lenders. In addition, the Company confirmed its intention to sell the business with the assistance of Morgan Stanley & Co. Incorporated. INTEGRATED HEALTH: Transfers Cheyenne Facility To Preferred Care ---------------------------------------------------------------- Debtor IHS-Cheyenne leases a 240 bed residential care facility located at 2860 East Cheyenne Avenue, Las Vegas, Nevada. The Facility exposes the Integrated Health Services, Inc. Debtors' estates to an aggregate annual administrative liability in excess of $1,100,000 according to the Debtors' evaluation. Retaining the Facility will jeopardize the successful reorganization of their estate, the Debtors told Judge Walrath. Accordingly, the Debtors sought and obtained the Court's authority for the transition of the Facility to Preferred Care West, Inc., pursuant to sections 105(a), 363(b), 365(a) and 365(b) of the Bankruptcy Code and Rules 6004 and 6006 of the Bankruptcy Rules. Specifically, the Debtors asked the Court to approve a Lease Assignment and Operations Transfer Agreement by and among IHS-Cheyenne, Preferred Care, Thomas Scott and North Las Vegas ICF, L.L.C. (landlord). The Transfer Agreement governs the transition of the Facility to Preferred Care in accordance with applicable state and federal regulations. In addition, the Transfer Agreement governs the assumption and rejection of the Lease. The Agreement provides that the Landlord will accept an aggregate cure payment totaling $105,757.87 in full satisfaction of all defaults under the Lease. The Debtors submit that inasmuch as the Landlord has consented to the Transfer Agreement, there is no need for Preferred Care to provide adequate assurance of its future performance under the Lease. Nevertheless, Preferred Care has access to available funds sufficient to timely satisfy its future Lease obligations and, if requested, can provide adequate assurance of availability of sufficient funds, the Debtors submitted. The Debtors believe that the transactions set forth in the Transfer Agreement represent an exercise of sound business judgment as the Transfer Agreement benefits the Debtors' estates by eliminating the significant ongoing administrative liability represented by the Facility. (Integrated Health Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) J.C. PENNEY: Fitch Lowers Notes' Rating To BB+ From BBB- -------------------------------------------------------- Fitch has downgraded its rating of J. C. Penney Co., Inc.'s notes and debentures from 'BBB-' to 'BB+'. J.C. Penney Funding Corp.'s 4(2) commercial paper program is also downgraded from 'F3' to 'B'. At the same time, the ratings are removed from Rating Watch Negative, where they were placed on Oct. 6, 2000. Approximately $5.4 billion of debt is affected by the downgrade. The Rating Outlook is Negative. The downgrade reflects persistent operating weakness in Penney's department store and Eckerd drugstore operations. The department stores have struggled to gain sales traction in the increasingly competitive middle market. At the same time, Eckerd's profitability has been hampered by poor execution and pressure from managed care in its growing drugstore operations. Penney's credit measures continued to weaken in 2000. Coverage as measured by EBITDAR (including discontinued operations but before restructuring and other charges) to interest plus rents declined in 2000 to 1.4 times (x) from 1.5x in 1999. Leverage as measured by lease-adjusted debt-to-EBITDAR increased to 6.8x from 5.9x. While these levels are weak for the rating category, Fitch expects them to rebound over the medium term as debt levels are reduced and profitability and cash flow improves. Despite its soft operations, the 1999 sale of its credit card receivables and improving free cash flow have strengthened Penney's balance sheet and liquidity. Liquidity will be further enhanced with the pending sale of the company's Direct Marketing Services business, with the majority of the proceeds being used to retire debt maturities over the next couple of years. This will allow management time to implement its turnaround strategies. The new management team, under the direction of CEO Allen Questrom, is taking positive steps to return the company to profitable growth over the long term. These steps include the recent centralization of the merchandising function at the department stores, which should lead to improved assortments and more timely movement of goods into the stores. In addition, both the department stores and Eckerd are implementing new marketing strategies, reducing expenses, and remodeling stores. Nevertheless, the Negative Rating Outlook reflects a weakened economic outlook, the competitive nature of the pharmacy and department store sectors, and the risks associated with implementing new strategies. It also reflects the expectation that it could take an extended period of time for the company's turnaround efforts to take hold. Penney operates 1,111 J.C. Penney department stores in all 50 states, Puerto Rico and Mexico, and 49 Renner department stores in Brazil. Penney also has a large catalog business and a growing internet commerce effort. In addition, the company owns 2,640 Eckerd drugstores, which are located throughout the Southeast, Sunbelt, and Northeast. LA MANCHA: UAW Makes $9.75 Million Bid For Palm Springs Resort -------------------------------------------------------------- Despite some union members' concern, the United Auto Workers (UAW) has bid $9.75 million for a bankrupt California resort, calling the move "a very sound business investment," according to the Associated Press. Union officials wouldn't divulge their plans for the 100-bedroom resort, but if the court accepts the UAW's bid, the union would have 60 days to decide whether to make the purchase. La Mancha Resort Village, located in Palm Springs, Calif., is open but operating under chapter 11 protection. The Detroit Free Press reported that the union's bid is below the $11.1 million asking price. It is unclear whether the money to buy the resort would come from the UAW's pension fund, general fund of $117 million or $841 million strike fund, all of which are funded by members. (ABI World, May 16, 2001) LODGIAN INC.: Amends Senior Secured Loan Credit Facility -------------------------------------------------------- Lodgian, Inc. (NYSE: LOD) reported results for its first quarter ended March 31, 2001. 2001 First Quarter Results Total revenue for the first quarter 2001 was $114.8 million compared to $138.4 million for the first quarter of 2000. The 17% decrease is primarily due to the disposition of 20 hotels in the owned portfolio. RevPAR for the first quarter 2001, for hotels owned as of March 31, 2001, on a same unit basis, increased 0.7% as compared to the first quarter 2000. This primarily was as a result of an increase in average daily rates of 4.3%, partially offset by a 3.5% decline in occupancy. As disclosed in the Company's Form 10-Q, RevPAR for the first quarter 2001 for hotels owned during the first quarter 2001 declined by 0.8% compared to the first quarter 2000. This was primarily as a result of a 3.9% decline in occupancy partially offset by an increase in average daily rates of 3.4%. The primary difference between these RevPAR statistics is the sale of the Westin William Penn hotel in February 2001. After adjusting for $3.1 million of unusual costs primarily related to nonrecurring professional and legal fees and severance costs, first quarter 2001 EBITDA was $19.7 million, a 26.5% decrease compared to first quarter 2000 EBITDA on a same unit basis. This decrease was primarily due to an aggregate $3.0 million impact due to higher utility, property insurance, franchise fee and property tax costs. Also contributing to this decrease were a 0.7% increase in direct operating expenses and higher corporate overhead costs as a percentage of revenues. The Company realized a gain on asset dispositions in first quarter 2001 of $24.4 million, principally due to the sale of the Westin William Penn in February 2001. The Company incurred a $.07 per share loss for the first quarter 2001 compared to a $.60 per share loss for the first quarter 2000. "Despite the challenging first quarter economic environment, a number of profit enhancement initiatives have begun that will help drive longer term improved performance," said Thomas Arasi, Chief Executive Officer. "Overhead reductions on an annual run- rate basis versus budget at both the corporate office and at the properties have begun, marking progress in streamlining operations. Plans for purchasing and energy management initiatives are underway which should result in further operational efficiencies going forward. Furthermore our substantial, ongoing capital expenditure program will continue to create value in our real estate assets and position the company for revenue growth as economic conditions improve." Senior Secured Loan Credit Facility Amendment On May 15, 2001, the Company reached an oral agreement to amend its Senior Secured loan credit facility. The amendment is expected to be executed in the next few days. The amendment will modify various covenants and coverage ratios with which the Company will be in compliance. Prior to the amendment, the Company would have been in violation of two financial covenant coverage ratios. The principal modifications of the amendment are as follows: 1) the interest rate spread will increase incrementally to a maximum of LIBOR plus 6.00% no later than February 2002; 2) the interest rate spread will decrease 50 basis points for each aggregate $60.0 million of principal reductions made subsequent to the amendment date as long as the Company is in compliance with certain coverage ratios; and, 3) four additional amortization payments of $7.5 million each are due during 2002, which is consistent with the Company's plan to reduce overall debt. The Company will pay an amendment fee of $565,000 on the date of the amendment and an additional 75 basis point fee will be due January 1, 2002, based on any outstanding borrowings and commitments on that date. At May 15, 2001, the Company had $202.0 million outstanding on its Senior Secured loan credit facility. The Company is considering refinancing options to pay off the Senior Secured loan credit facility. A new Senior Vice-President of Finance has recently joined Lodgian to focus on such refinancing options and new sources of capital. 2001 Outlook Update Due to continued overall weakness in the current economic environment and specific weakness in certain of the Company's markets, Lodgian now anticipates that same unit RevPAR in 2001 will be flat to down approximately 1%. The Company currently projects that EBITDA for 2001, after excluding an estimate of $6 million for unusual costs, will range from $103 to $108 million, before considering any additional hotel dispositions. As a result of reducing expectations for 2001, the Company has reduced its total 2001 planned capital expenditures to $35 million. "A Vice-President of Asset Management was just hired to focus on cost reduction opportunities in fixed charges such as insurance, property taxes, and leases," said Thomas Arasi. "Furthermore, asset management will optimize the returns on our real estate assets through capital expenditure planning, dispositions, product repositioning, and re- branding." To date in 2001, the Company has sold three hotel properties for gross proceeds of $66.8 million and used $56.3 million of these proceeds to reduce debt. Lodgian continues to actively market a number of properties for sale and recently engaged two nationally recognized real estate brokers to assist the Company in its disposition efforts. Management continues to believe that the combination of its current cash position, cash flow from operations, availability on the revolving credit facility, and net proceeds from asset sales will provide sufficient liquidity to fund the Company's operating, capital expenditure and debt service obligations through December 31, 2001. Thomas Arasi further stated, "Our proactive asset sale program, efforts to reduce debt, overhead reductions, and asset management initiatives designed to optimize real estate asset values are consistent with progress toward our previously stated strategy of preparing Lodgian for any one of a number of possible strategic alternatives in the future. We remain committed to laying the groundwork for strategic alternatives and shareholder value creation as these opportunities present themselves." About Lodgian Lodgian, Inc. owns a portfolio of 109 hotels with approximately 20,300 rooms in 32 states and Canada. The hotels are primarily full service, providing food and beverage service, as well as meeting facilities. Substantially all of Lodgian's hotels are affiliated with nationally recognized hospitality brands such as Holiday Inn, Crowne Plaza, Marriott, Radisson, Hilton and Starwood. Lodgian's common shares are listed on the New York Stock Exchange under the symbol "LOD". Lodgian is a component of both the Russell 2000 Index, representing small cap stocks, and the Russell 3000 Index, representing the broader market. LOEWEN: Missouri Unit Seeks Authority To Sell Assets For $100K -------------------------------------------------------------- Because the parties previously authorized by the Court for the transaction failed to consummate it, Loewen Missouri, Inc. moved the Court again, pursuant to The Loewen Group, Inc.'s Disposition Program, for authority: (a) to sell the funeral home business and related assets at Comstock Funeral Home (3202), 1122 Main Street, Unionville, MO 63565 to Newman Funeral Home, Inc., free of all liens, claims and encumberances; (b) to assume and assign to the Purchaser the 7 executory contracts and unexpired leases, pursuant to section 363 of the Bankruptcy Code (Answering Service, Paging Service/Equipment Lease, Custodial Agreements (2), Management Agreements (2), Equipment Lease - Copier); (c) enter into all related agreements and transactions. Loewen Missouri told Judge Walsh that after the previous contemplated transaction fell through, they took the steps in accordance with the Disposition Program again and ultimately entered into the Asset Purchase Agreement with Newman Funeral Home, Inc. (the previous Initial Bidder), whereby Newman agreed to buy and the Debtors agreed to sell the property at a purchase price of $100,000 less the amount paid by the Purchaser under the Neweol Purchase Agreement. Certain accounts receivable, transferable permits and goodwill relating to the businesses will be transferred to the Purchaser. The Purchaser paid the Selling Debtors a deposit of $5,000 upon the execution of the Purchase Agreement and agreed to pay the remainder of the Purchase Price at the closing. The Purchaser agreed to assume all of the Selling Debtor's rights and obligations under the Assignment Agreements. In connection with the proposed sale of the Sale Locations, Neweol would sell and the Initial Bidder would purchase certain accounts receivable related to the Sale Locations pursuant to a purchase agreement between Neweol and the Initial Bidder. The amount of the Neweol Allocation will be determined immediately prior to closing. In accordance with the Net Asset Sale Proceeds Procedures, the Debtors will use the proceeds generated to repay any outstanding balances under the Replacement DIP Facility and deposit the net proceeds into an account maintained by LGII at First Union National Bank for investment, pending ultimate distribution on court order. The Debtors advise that currently, there are no net borrowings outstanding under the Replacement DIP Facility, so this provision is not presently operative. The Debtors covenant to comply with this provision to the extent that it becomes operative in the future. Funds necessary to pay bona fide direct costs of a sale may be paid from the account without further order of the Court. The Debtors will deposit the net proceeds into an account maintained by LGII at First Union National Bank for investment, pending ultimate distribution on court order. The Selling Debtor has determined that the sale of the Business to the Purchaser on the terms set forth in the Purchase Agreement is in the best interests of their estates and creditors. (Loewen Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) LTV CORPORATION: Resolves Contract Dispute With Peoples Energy -------------------------------------------------------------- The LTV Corporation and Peoples Energy presented an Agreed Order resolving the Motion by Peoples Energy to compel debtors to assume its gas and power contracts. Peoples has calculated the anticipated monthly usage under the Gas Agreement and the Power Agreement, and will provide that figure to the Debtors, along with supporting information reasonably necessary to verify the calculations. The Debtors may notify Peoples within two business days if they dispute the calculation of these estimated monthly charges. The Debtors will pay by wire transfer actual postpetition chares for periods through January 31, 2001, no later than three business days after receipt of the chares from Peoples. Thereafter, the Debtors will pay one-half of the estimated monthly chares on each of the Power Agreement and the Gas Agreement on each bi-monthly payment date. In the event of any dispute by the Debtors, an initial payment will be made within two business days after the parties agree on the estimated monthly charges. Payments will be made on the 15th day and the last day of each month through termination or expiration of the Gas Agreement or the Power Agreement, as applicable. Peoples will provide information to the Debtors on the total actual usage and billing charges for each month by a bill ordinarily dated the 17th day of the following month. The parties will then engage in a "true up" based on the actual billing for the preceding month, less the payments previously made by the Debtors for estimated usage for that month. If the amount of the estimated monthly charges for that month is in excess of the actual billing amount for the month, the Debtors may reduce their next payment by the overpayment, or may require Peoples to remit the overpayment amount to the Debtors by the last day of the billing month. If the estimated monthly charges are less than the actual billing amount for the month, the Debtor will remit the under payment amount by the last day of the billing month. If the Debtor fails to make any of the scheduled payments, Peoples will give notice of the same to the Debtors and their Committees. If no cure is had within five days after notice, Peoples may suspend performance under the Power Agreement and the Gas Agreement and will not be required to make further deliveries. The Debtors do not assume or reject either the Power Agreement or the Gas Agreement, nor shall anything in the Agreed Order be deemed to constitute any such assumption or rejection by the Debtors. Judge Bodoh found that the objection by Keybank is moot since the agreement between the Debtors and Peoples does not grant Peoples a superpriority claim, and overrules the objection of the Creditors' Committee. Upon review of the Agreed Order, Judge Bodoh found that it is fair and reasonable, and signed it. (LTV Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-00900) MARINER: Court Allows Alice Frakes To File Late Proof of Claim -------------------------------------------------------------- Mariner Post-Acute Network, Inc. has consented and obtained the Court's authority to permit Alice Frakes, as Personal Representative of the Estate of Pearl Cox, to file a late proof of claim because Ms. Frakes stated that she never received actual notice of the MPAN bankruptcy proceedings until after the claims bar date. Accordingly, Ms. Frakes will be permitted by the Court to file her proof of claim within 30 days of the execution by the Court of the Stipulation and Order. (Mariner Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900) MARTIN INDUSTRIES: AmSouth Bank Agrees To Extend Credit Facility ---------------------------------------------------------------- Martin Industries, Inc. (NASDAQ/NM:MTIN), a manufacturer of premium gas fireplaces and barbecue grills, said it has reached an agreement in principle with its primary lender, AmSouth Bank, to amend and extend its credit facility until January 1, 2002 and to amend the line of credit and term loan under the credit facility. In addition to the extension of the line of credit through January 1, 2002, the proposed terms provide that up to $11 million will be available under the revised line of credit based upon the value from time to time of certain assets securing the credit facility; a $1 million increase from the credit currently available. The proposal also provides that the principal payments under the Company's $2.4 million term loan would be amortized and payable monthly instead of semi-annually. The proposed amendment further contemplates a modification of the interest rates and fees applicable to the loans and provides for the amendment of certain financial covenants based upon current financial projections of the Company. AmSouth has agreed to an extension of the present credit facility to June 15, 2001, in order to allow adequate time to complete the required definitive documentation for the proposed amended credit facility. There can be no assurance, however, that the proposed amendments to the credit facility will be completed by such date or, if necessary, further extensions granted beyond June 15, 2001. In connection with the current extension granted by AmSouth, the Company has agreed to an increase in the interest rates of its current indebtedness to the bank's prime lending rate plus one percent. Jack Duncan, President and CEO, stated, "Based on our conversations with customers, they have been hesitant to place their orders with us until our financing situation was clarified. We believe that the proposed extension and amendment of our lending arrangement with AmSouth will provide the necessary working capital during our heavy manufacturing period to enable us to continue to manufacture our products and provide our customers with high quality products in a timely fashion. The amended credit facility should decrease the uncertainty our customers have faced and allow them to once again place their orders and their confidence with Martin." He went on to say, "The length of the agreement provides the time necessary for us to be in a better position to generate profits from our measurably improved operations as well. Although we have not yet completed the documentation necessary to effect the amendments to our credit facility, we expect to do so prior to June 15, 2001." Martin also announced financial results for the first quarter ended March 31, 2001. The Company reported a net loss of $2.7 million, or $.34 per share, on net sales of $15.3 million. This compares with a net loss of $2.0 million, or $.26 per share, on $22.6 million in net sales for the first quarter of last year. Martin Industries has two business segments. The decline in net sales was primarily due to a 41% decline in gross sales of the "Leisure and Other Products" business segment. This was caused by a $5.3 million, or 47%, decrease in gross sales of Broilmaster(R) premium barbecue grills, which was slightly offset by improved sales of NuWay(TM) utility trailers. Part of the decline in the level of sales for grills as compared to the same period last year was attributed to timing of orders due, in part, to customers' desire to reduce inventory levels. In previous years, customers have generally purchased the majority of their forecasted inventory requirements during the first quarter under the Company's dating program. As an alternative to the dating program, Martin has begun offering a new "Options" program that combines its recently implemented on-demand production capability with customers' desire to reduce their inventory levels and better match order timing with consumer demand. The "Home Heating Products" segment declined in gross sales by $2.2 million or 22%. Lower housing starts, due to inclement weather in the South and Southeast, and the continued depression in the manufactured home industry negatively impacted sales of gas fireplaces and other hearth products. Sales of home heating appliances also declined slightly during the quarter. Jack Duncan commented, "Revenue restoration is our prime focus to continue our plan to profitability now that we expect to extend our financing through year end. We are assertively addressing the marketplace to increase orders from existing customers and continue to add new customers through a concerted sales effort supported by our streamlined production and quality customer support. We also continue to focus on costs, and given the slow start to the year, we have recently completed another reduction of fixed cost salaries. These reductions exceed $1 million on an annualized basis, excluding severance costs. This effort, combined with our $10 million annualized cost reduction in 2000, reduces our cost structure significantly when compared with last year, helping to address our cash flow. The reduced cost structure is realized in the lower decline of profits relative to the significant decline in revenues this last reporting period. Additionally, we recently implemented a formal, highly-focused value engineering effort which is beginning to be realized through reduced production costs." "Our increased sales efforts appear to have produced a noticeable increase in orders," he continued. "Despite customers' previous doubts as to our financial capability, orders have increased three fold in the last two weeks to an average rate of $1.5 million per week. We have markedly ramped up production capability to meet the sudden growth in demand. We anticipate orders continuing to improve given the financial stability offered by our proposed revised lending arrangement, increased housing starts, and better weather. We intend to continue to meet the challenge of demonstrating to our customers the quality of our products and service in order to regain the market share we have historically commanded." Martin Industries designs, manufactures and sells high-end, pre- engineered natural gas fireplaces and decorative gas logs and gas heaters and appliances for commercial and residential new construction and renovation markets. It also designs and manufactures premium gas barbecue grills under the brand name Broilmaster(R) for residential and small commercial use, and do- it-yourself utility trailer kits known as NuWay(TM). Additional information on Martin Industries and its products can be found at its website: http://www.martinindustries.com MATTRESS DISCOUNTERS: S&P Junks Corporate & Senior Debt Ratings --------------------------------------------------------------- Standard & Poor's lowered its corporate credit and senior unsecured debt ratings on Mattress Discounters Corp. to triple- 'C'-plus from single-'B' and its senior secured bank loan rating to single-'B'-minus from single-'B'-plus. The outlook is negative. The downgrade is based on the company's continued weak operating performance, constrained liquidity position, and violation of financial covenants. Sales in the first quarter ended March 31, 2001 decreased 17% from the same period in the prior year. Significant comparable store sales declines were reflected throughout the company's markets with the Denver and Chicago markets showing declines of 55% and 30%, respectively. The Chicago market, which represents about 23% of the company's store base, has experienced prolonged negative same-stores sales. As a result, the company had negative EBITDA of $.7 million and was not in compliance with the total debt and interest coverage ratio covenants of its senior credit facility. On May 14, 2001, the company reached an agreement to amend the covenants. However, the company anticipates that it will not be in compliance with the revised financial covenants in the second quarter of 2001, and is currently in discussions with its lenders to further amend the agreement. In April 2001, the company drew down $18 million from its revolving credit facility to finance current expenses leaving only $2.0 million of availability. Upper Marlboro, Md.-based Mattress Discounters is the leading bedding retailer in the U.S., with 295 locations in the U.S. The company sells both Sealy manufactured bedding accessories and its own private label Comfort Source products. Outlook: Negative If Mattress Discounters is unable to generate positive cash flow or amend its financial covenants, the ratings could be lowered. NTEX INCORPORATED: Noteholders Endorse Plan of Arrangement ---------------------------------------------------------- Ntex Incorporated filed a Plan of Arrangement pursuant to The Companies Creditors' Arrangement Act ("CCAA") to compromise its 11.5% Senior Notes due 2006 ("Old Senior Notes") and 1% Junior Subordinated Notes due 2030 ("Old Junior Notes"). Ntex's operating subsidiaries are not filing under the CCAA and the Plan does not contemplate a compromise in respect of any other class of debt, banking, trade debt, lease obligations or executory contracts of Ntex or its operating subsidiaries. Ntex advised that it has obtained the written support from the requisite holders of both the Old Senior Notes and Old Junior Notes necessary to approve the Plan subject to final documentation. The Plan is subject to approval by the holders of Old Senior Notes and Old Junior Notes at meetings of noteholders which have been scheduled for June 26, 2001. Thereafter the Plan is subject to the approval of the Ontario Supreme Court. Subject to approval of the Plan, Ntex has also negotiated a restructuring of its Senior Secured Facility with York Capital Funding Inc. Pursuant to the Plan, the US$35,778,000 of Old Senior Notes including all accrued and unpaid interest thereon will be discharged (the related indenture and guarantees will also be discharged) and the holders thereof will receive in exchange therefor (i) US$6,440,040 of new 7.5% Senior Notes due 2006 (the "New Senior Notes"); and, (ii) US$29,337,960 of new 1% Subordinated Notes due 2030 ("New Sub Notes"). The New Senior Notes will also accrue interest compounded at the rate of 8% per annum payable at maturity. Pursuant to the Plan, the US$21,553,200 of Old Junior Notes including all accrued and unpaid interest thereon will be discharged (the related indenture will also be discharged) and the holders thereof will receive in exchange therefor US$21,776,414 of new 1% Junior Subordinated Notes due 2030 ("New Junior Sub Notes"). The payment of interest on the New Senior Notes, New Junior Notes and New Sub Notes will be subject to Ntex attaining certain EBITDA thresholds (earnings before interest, taxes, depreciation and amortization) ranging from $18 million to $22 million during the relevant 12 month period. Subject to approval of the Plan, York has agreed to restructure the terms of the Senior Secured Facility by: (i) reducing the cash interest to 15% per annum from 25% per annum with an additional 5% per annum accruing and added to the principal thereof; and, (ii) deferring certain principal and interest amounts. Management believes the approval of the Plan will allow Ntex to focus on continuing to consolidate and extend its niche market positions within the North American textile market. Further details with respect to the Plan are available on a material change report filed via SEDAR (www.sedar.com) Results for Fiscal Year Ended December 31, 2000 Net sales for the year decreased 3.5% to $151.1 million as compared to $156.5 million in 1999 due to the continued weak demand for apparel yarn, offset by moderate increases in towel sales. EBITDA for the year increased 29.7% to $17.9 million as compared to $13.8 million in 1999 mainly due to lower cotton costs and the absorption of fixed overheads from higher volumes at the Towel Division. Net income for the year was $14.4 million ($0.84 per share basic and $0.79 fully diluted) as compared to a net loss of $10.4 million in 1999 ($0.84 loss per share basic and fully diluted). The increase was mainly due to the gain on purchase of Senior Notes completed in December 2000 and increased EBITDA as discussed above. Results for the First Quarter Ended March 31, 2001 Net sales for the quarter decreased 10.2% to $33.2 million as compared to $37.0 million in 2000 due to the continued weak demand for apparel yarn, reduced towel shipments due to the slowdown in the North American retail and hospitality sectors, and the fact that several new large towel programs were launched during the comparable 2000 period. EBITDA for the quarter decreased 26.8% to $3.0 million as compared to $4.1 million in 2000 mainly due to lower sales and decreased gross margins resulting from lower levels of absorbed fixed overheads. Net loss for the quarter was $3.7 million ($0.28 loss per share basic and diluted) as compared to a net loss of $2.0 million in 2000 ($0.17 loss per share basic and diluted). Subsequent to the end of the quarter the Company is experiencing increased demand for towel and yarn which is expected to improve results for the remainder of 2001. Ntex is a vertically integrated manufacturer of textile products which manufactures textile products in the United States and Canada for customers throughout North American. ORIUS CORPORATION: S&P Places Low-B Credit Ratings On Watch ----------------------------------------------------------- Standard & Poor's placed its ratings for Orius Corp. on CreditWatch with negative implications. These are: * Corporate credit rating at B+ * Senior secured debt at B+ * Senior subordinated debt at B- The rating action affects $150 million in subordinated notes, and the firm's $425 million bank credit facility. The CreditWatch placement reflects weaker-than-anticipated performance, and the expectation that continued softness in critical end markets will further erode financial flexibility and credit protection measures. For the first quarter of 2001, the company's pro forma EBITDA margin was 6.8%, well below Orius management's March 15, 2001, estimate of approximately 10%, and significantly below the 17.2% margin the company achieved over last year's prior period. For fiscal 2001, the company currently expects revenues of $700 million-$725 million, and EBITDA margins in the 13%-15% area, compared with the firm's prior estimates of approximately $800 million in revenues and 15%-16% EBITDA margins. As a result of the weak performance, and slower account receivable collections, total debt (excluding the firm's junior subordinated notes) to pro forma EBITDA has increased to 4.3 times (x) at March 31, 2001, from 3.3x a year ago, heightening Standard & Poor's concerns that the company may fail to comply with some financial covenants under its bank credit agreement in the very near term. West Palm Beach, Fla.-based Orius competes in the large and highly fragmented telecommunications infrastructure service industry. In the long term, the industry should benefit from increasing demand for bandwidth, the trend of outsourcing construction services, and the need for telecommunication providers to continually maintain and replace facilities as newer, more cost-efficient technologies are developed. However, over the past couple of quarters, the industry has experienced a sharp decline in project specific work, as many customers in the telecommunications and cable markets have been unable to access the capital markets, which has constrained their capital spending plans. Relative to other rated telecommunications infrastructure providers, Orius generates a higher percentage of sales from project specific agreements, making the company more vulnerable to softening market conditions. Standard & Poor's will discuss with Orius management its plans to maintain adequate financial flexibility, including potential negotiations with its secured lenders, as well as its operating strategies, before taking further rating actions. PACIFIC GAS: Funding Energy Programs & Paying Pre-Petition Taxes ---------------------------------------------------------------- The U.S. Bankruptcy Court approved Pacific Gas and Electric Company's motion to confirm that the funds collected by the utility for Public Purpose Programs -- including energy efficiency, low income, research and development and renewable generation programs -- are not part of the bankruptcy estate and can be used to honor pre-petition obligations incurred in connection with the Public Purpose Programs. In addition the court also allowed the utility to pay its pre-petition portion of property taxes. Pacific Gas and Electric Company will be able to immediately pay for costs incurred in connection with the Public Purpose Programs prior to April 6, the day it filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The utility owes approximately $37 million to consumers who have requested rebates and to contractors who have performed work in customers' homes and businesses to make them more energy efficient. This ruling ensures that the $260 million now in the energy efficiency accounts will be fully available for payments for these programs. Pacific Gas and Electric Company operates the most extensive energy efficiency program in the nation, and the continued vitality of these programs will be a critically important part of California's efforts to reduce the severity of rolling blackouts this summer. Pacific Gas and Electric Company administers energy efficiency programs under the auspices of the California Public Utilities Commission. The utility collects more than $200 million each year from ratepayers, which are used to provide customers with rebates for energy efficient appliances, lighting and equipment; weatherization services for low-income customers; and consulting services for residential and business customers. The programs available include 1-2-3 Cashback, Residential Contractor Program, Express Efficiency and Standard Performance Contract. Pacific Gas and Electric Company's ratepayers also fund research and development and renewable generation programs through the California Energy Commission. The U.S. Bankruptcy Court also authorized and directed Pacific Gas and Electric Company to pay the pre-petition portion of its property taxes. The company pays property taxes in 49 counties. As a result of today's ruling, Pacific Gas and Electric Company will be able to immediately pay up to $41.2 million, its portion of property taxes prior to April 6, the day it filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The company's total property tax payment was $78.5 million, and it paid the post-petition portion of $37.3 million on April 10. Pacific Gas and Electric Company will continue to work with county tax collectors to determine if the company is subject to any late penalties. PILLOWTEX: Closing Some Operations in Kannapolis And Columbus ------------------------------------------------------------- Citing the continuing decline in market conditions and as part of its restructuring under Chapter 11 bankruptcy, Pillowtex Corporation (OTC: Bulletin Board: PTEXQ) said it will close a sheet manufacturing plant in Kannapolis and a towel yarn manufacturing operation in Columbus, Ga. In addition, the Company plans to scale back towel production in Kannapolis. The restructuring eliminates the jobs of approximately 590 employees in Kannapolis and approximately 190 employees in Columbus. The Company began notifying affected employees on Tuesday. "We regret that economic conditions beyond our immediate control have forced the difficult decision to close or scale back these operations and are sensitive to the personal impact it will have on our employees, their families and the surrounding communities," said Bob Haase, Pillowtex's executive director for operations. "However, we must ensure the future viability of our overall business by taking these difficult, but deliberate steps. We believe that the actions we are taking will allow us to service our customers more effectively and, in turn, improve the Company's viability in the very competitive home textiles industry." Haase said the restructuring eliminates excess manufacturing capacity brought about by declining towel and sheet sales and will allow the Company to better align its production capacity to sales. For example, he said, net sales were down more than 16 percent in this year's first quarter as compared to the first quarter of 2000. "Since last November, employees have undergone frequent periods of temporary layoffs. This reorganization should allow the Company to operate on more predictable schedules," Haase said. A sheet manufacturing facility, Plant 4 in Kannapolis will be closed by July 15, 2001. The plant employs approximately 200 management and hourly employees and manufactures low thread- count muslin and percale sheeting fabric. Production of certain goods currently manufactured at Plant 4 will move to the Company's remaining sheet greige facility, Plant 16, in nearby China Grove. The building housing Plant 4 will be marketed for sale. Restructuring at Plant 1 will affect approximately 390 hourly and management employees in the #1 weave department and portions of towel wet finishing, towel fabrication, and towel distribution. The Company will phase out the looms operating in the #1 weave department over the next several months. The Company will continue producing bath towels, hand towels and washcloths in the #2 and #6 weave departments, Plant 1's more modern towel weaving operations. After the restructuring, 3,500 employees will remain at Plant 1. As part of the restructuring, the yarn department in Columbus, Ga. will close by July 15, 2001. The department employs approximately 190 persons and produces yarn for towel weaving. Production of certain yarn currently manufactured at Columbus will move to the Company's towel yarn manufacturing department in Kannapolis and to its yarn manufacturing plant in Tarboro, N.C. The Company will continue to operate the towel warping, bleaching and dyeing departments in Columbus. The Company's towel manufacturing operations in neighboring Phenix City, Ala. will not be affected. After the restructuring, 1,150 employees will remain at Columbus and Phenix City. Pillowtex is working with employees affected by the closures and restructuring. "The people affected by this action are good workers, and the Company greatly appreciates their efforts. We will do all we can to ease this difficult transition in their lives," said Don Mallo, vice president, human resources. "Our goal is to make certain that all employees impacted have immediate access to information they and their families need during this transition period." To assist employees affected by the closings, the Company is working closely with the North Carolina Employment Security Commission and the Georgia Department of Labor which intends to have representatives on-site at the affected facilities to provide direct access to claims filing, information about possible job opportunities, job retraining and other unemployment benefits. Pillowtex human resources managers at each location will help with questions concerning company benefits. Employees at the Kannapolis and Columbus locations are represented by the Union of Needletrades, Industrial and Textile Employees (UNITE). The Company and UNITE will begin negotiations to determine other applicable benefits including the possibility of hiring at neighboring Pillowtex facilities for the affected employees. Mallo said the Company intends to work with local government and economic development commissions in Kannapolis and Columbus to minimize the impact of the job losses to the communities. Pillowtex Corporation, with corporate offices in Kannapolis, N.C., is one of America's leading producers of household textiles including towels, sheets, rugs, blankets, pillows, mattress pads, feather beds, comforters and decorative bedroom and bath accessories. The Company's brands include Cannon, Fieldcrest, Royal Velvet, Charisma and private labels. The Company filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code on November 14, 2000. Pillowtex currently employs approximately 12,200 people in its network of manufacturing and distribution facilities in the United States and Canada. PSINET INC.: Tells SEC Form 10-Q Will Be Late --------------------------------------------- PSINet Inc. (OTCBB:PSIX) filed a Form 12b-25 with the Securities and Exchange Commission indicating that it will not be able to file its Form 10-Q for the quarter ended March 31, 2001 within the prescribed time period. The Company, at this time, does not expect to file its Form 10-Q within the 5-day extension period permitted under Rule 12b-25. As a result of the Company's inability to comply with the reporting requirements under the Securities Exchange Act of 1934, its securities will no longer be eligible for resale under Rule 144 of the Securities Act of 1933. In addition, holders of the Company's common stock, Series D preferred stock and PSINet Consulting Solutions Holdings, Inc.'s 2.94% convertible subordinated notes may no longer use the Company's registration statements on Form S-3 for resales or conversions of such securities. PSINet previously announced that it is likely that its common stock and preferred stock will have no value. As previously announced, the Company's cash, cash equivalents, short-term investments and marketable securities are not expected to be sufficient to meet the Company's anticipated cash needs and the Board of Directors of the Company has formed a restructuring committee in order to more effectively facilitate a reorganization of the Company's business. The Company and its advisors continue to analyze and pursue certain financial and strategic alternatives, including the possible sale of all or a portion of the Company, while also exploring alternatives to restructure the Company's obligations to its bondholders and other creditors. However, there can be no assurance that one or more of these alternatives can be successfully implemented and no assurance that, even if any of such alternatives are implemented, the Company will not run out of cash. These efforts are likely to involve reorganization under the federal bankruptcy code. PSINet also announced that its Board of Directors did not declare the May 15, 2001 quarterly dividend of $14.4 million to holders of its Series D preferred stock. At the time of issuance of the Series D preferred stock, a deposit account was established with sufficient funds to make quarterly payments through February 15, 2001. Accordingly, prior payments on the Series D preferred stock were made from this deposit account. If dividends on the Series D preferred stock are in arrears for six quarterly periods, holders of the Series D preferred stock will be entitled to elect two directors to the Company's Board of Directors at the Company's next annual or special meeting. Such voting rights would continue until the divided arrearage is paid in full. At the time of issuance of the Company's Series C preferred stock, a similar deposit account was established with sufficient funds to make quarterly payments through May 15, 2002. A quarterly payment of $3.9 million was paid by the deposit agent out of this account on May 15, 2001 to the holders of the Series C preferred stock in accordance with the terms of the related deposit agreement. The remaining balance in this deposit account, after the May 15, 2001 payment, is $15.4 million. Headquartered in Ashburn, Virginia, PSINet Inc. is a leading provider of Internet and IT solutions offering flex hosting solutions, global eCommerce infrastructure, end-to-end IT solutions and a full suite of retail and wholesale Internet services through wholly-owned PSINet subsidiaries. Services are provided on PSINet-owned and operated fiber, web hosting and switching facilities, currently providing direct access in more than 900 metropolitan areas in 27 countries on five continents. PSINet information can be obtained by e-mail at info@psi.com or by calling in the U.S. 800/799-0676. REGAL CINEMAS: Creditors Demand Payment For $1.8 Billion Debt ------------------------------------------------------------- Regal Cinemas Inc. disclosed that its senior credit line lenders and its outstanding note holders have demanded that the company pay its outstanding debt of $1.8 billion, according to Dow Jones. Of the $1.8 billion, $85.2 million of that has accrued in unpaid interest. In the company's quarterly report filed Monday with the Securities and Exchange Commission, Regal said that it couldn't fund or refinance the debt and interest. Regal hasn't complied with certain covenants since the fourth quarter and as a result is in default on the bank line and notes. The payment acceleration was prompted when Regal defaulted on an interest payment that was due at the end of March. The company has hired financial advisers and is evaluating restructuring alternatives, including a potential recapitalization or bankruptcy. (ABI World, May 16, 2001) RITE AID: Expects To Close $3.0 Billion Refinancing Deal in Q2 -------------------------------------------------------------- Rite Aid Corporation (NYSE, PSE:RAD) announced the details of a comprehensive $3.0 billion refinancing package that includes a commitment for a new $1.9 billion senior secured credit facility fully underwritten by Citibank NA, J.P. Morgan Chase & Co., Credit Suisse First Boston Corporation and Fleet Retail Finance, Inc. Rite Aid said that upon completion of the planned transactions, scheduled to close during the company's second fiscal quarter, the company will have significantly reduced its debt and the amount of its debt maturing prior to March 2005. The closing of the new credit facility is subject to the satisfaction of customary closing conditions and the issuance by Rite Aid of approximately $1.05 billion in new debt or equity securities, of which $527 million has already been committed or arranged. The company plans to raise, at a minimum, the additional $523 million by issuing equity and fixed income securities and through real estate mortgage financings in transactions which will close simultaneously with, and which will be conditioned upon, the closing of the new credit facility. The new credit facility will be secured by inventory, accounts receivable and certain other assets owned by Rite Aid subsidiaries. The facility will be used to repay the company's first and second lien debt, pay expenses associated with the planned refinancing and for general working capital purposes. Bob Miller, chairman and chief executive officer of Rite Aid, said: "We are excited about the support for Rite Aid and its turnaround plan that these refinancing commitments represent and are confident we will complete these transactions this summer. This refinancing will eliminate uncertainty about Rite Aid and its 2002 debt obligations and will allow us to focus on continuing to improve same-store sales, cash flow and Rite Aid's overall financial performance." Included in the $527 million in new debt and equity securities that has already been committed is a $149 million private placement comprised of 23 million shares of common stock committed on March 22, 2001 at $5.50 per share and 3.5 million shares of common stock committed on May 2, 2001 at $6.50 per share. The closing of this equity investment will take place simultaneously with, and is contingent upon, the completion of the new credit facility. The company also said that one of the holders has committed to exchange $152 million of the company's 10.5% Senior Secured Notes due 2002 for $152 million of new 12.5% Senior Secured Notes maturing in 2006. The new notes will be secured by a second lien on the collateral securing the new credit facility. In connection with the exchange, the holder will receive five- year warrants to purchase 3.0 million shares of common stock at $6.00 per share. The exchange will take place simultaneously with, and is contingent upon, the closing of the new credit facility. Rite Aid said that also included in the $527 million that has already been committed are recently completed or contracted private exchanges of its common stock for $226.2 million of its bank debt and 10.5% Senior Secured Notes due 2002. Once the refinancing transactions are completed, Rite Aid's remaining debt due before March 2005 will be $152.0 million of the company's 5.25% Convertible Subordinated Notes due 2002, $107.8 million of its 6.00% Dealer Remarketable Securities due 2003, $259.2 million of its 10.5% Senior Secured Notes due 2002 and amortization of the new credit facility. The company said it expects to use internally generated funds to retire both the 5.25% notes and the dealer remarketable securities at maturity and to meet its amortization payments under the new credit facility. It also said that funds to repay the 10.5% notes at maturity are included in the new credit facility. The company is being advised on the refinancing by Salomon Smith Barney Inc., J.P. Morgan Chase & Co. and Credit Suisse First Boston Corporation. Rite Aid said that the commitment letter for the new credit facility will be filed in its Form 10-K with the Securities and Exchange Commission. The debt and equity securities to be offered by the company will not be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of more than $14 billion and more than 3,600 stores in 30 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's website at www.riteaid.com. TANDYCRAFTS: Files Chapter 11 Petition in Wilmington ---------------------------------------------------- Tandycrafts Inc. and two of its affiliates filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Wilmington, Del., listing $64.5 million in assets and $56.3 million in liabilities, according to Dow Jones. The Fort Worth, Texas-based maker of frames and other wall decor products estimated that it had between 200 and 999 creditors, but also said that funds would be available for distribution to unsecured creditors. The company had extended a forbearance agreement with its lenders through Tuesday after failing to make an interest payment due to lenders on May 1. On Friday, Tandycrafts said it wouldn't seek a review of the New York Stock Exchange's decision to delist its stock. The company said its shares would trade on the pink sheets. According to the petition, there are 12.9 million common shares outstanding, held by 6,500 holders. (ABI World, May 16, 2001) TANDYCRAFTS: Case Summary & 20 Largest Unsecured Creditors ---------------------------------------------------------- Lead Debtor: Tandycrafts, Inc. 1400 Everman Parkway Forth Worth, TX 76140 Debtor affiliates filing separate chapter 11 petitions: Tandyarts, Inc. TAC Holdings Type of Business: Manufacturer and marketer of frames, framed art, mirrors, bulletin boards, and other wall d�cor products Chapter 11 Petition Date: May 15, 2001 Court: District of Delaware Bankruptcy Case Nos.: 01-01764, 01-01766, 01-01767 Debtors' Counsel: Allan B. Hayman, Esq. Scott K. Rutsky, Esq Glenn S. Walter, Esq. Proskauer Rose LLP 1585 Broadway New York, New York 10036 (212) 969-3000 and Mark E. Felger, Esq. Cozen and O'Connor Chase Manhattan Centre 1201 North Market Street Suite 1400 Wilmington, DE 19801 (302) 295-2000 Total Assets: $64,559,000 Total Debts: $56,370,000 Consolidated List of Debtors' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Cadwalader, Wickersham Legal Service $390,000 & Taft Dennis Block General Post Office P.O Box 5629 New York, NY 10087-5929 (212) 504-6000 ITT Gilfillan Material Sales $359,200 Gil McDougal 7821 Orion Avenue Van Nuys, CA 91409 (818) 901-2565 Emafyl Material Sales $330,565 Sharon Simons 122-150 Hackney Road London, England E7 7QS 11.44.207.739.3744 Crescent/US Mat Material Sales $276,228 Alisa Boss 100 W. Willow Road P.O. Box XD Wheeling, IL 60090 Peerless Coatings, Inc. Material Sales $202,670 Stone Container Material Sales $199,069 Steel City Lumber Co Material Sales $193,880 U-Jin Chemical USA Material Sales $177,920 Lone Star Chemical Material Sales $165,607 Northwest Hardwoods Material Sales $164,132 Alpha Packaging Material Sales $150,052 James D. Morgan Co., Inc. Material Sales $133,252 North American Forest Material Sales $128,677 Products Paul P. Bellenger Lumber Co. Material Sales $116,229 AFG Industries Material Sales $111,041 Coastal Lumber Material Sales $109,707 New Cargo Furniture, Inc. Contract $98,796 Continental Timber Company Material Sales $97,321 Radioshack Corporation Indemnification Unknown (f/k/a Tandy Corporation) Huntington Pacific Environmental Unknown Ceramics, Inc. THERMADYNE HOLDINGS: Credit Ratings Fall To Junk Levels ------------------------------------------------------- Standard & Poor's lowered its ratings on Thermadyne Holdings Corp. and related entities (see list below). At the same time, all ratings were placed on CreditWatch with negative implications. About $792 million of debt and credit facilities are affected. As of March 31, 2001, the company was in violation of certain financial covenants associated with its bank credit facility. The company was able to obtain waivers from its banks until May 23, 2001. However, the waivers limited the company's ability to pay interest associated with its 10.75% subordinated notes due 2003. As a result, the company was unable to make its May 1, 2001, interest payment associated with these notes and is now in the 30-day cure period. The company has indicated that it will not make its interest payment associated with these notes at the expiration of the 30-day cure period, which will result in a default. In addition, the company has approximately $14 million in interest payments (including the subordinated notes) associated with its various debt obligations due within the next 60 days. St. Louis, Mo.-Thermadyne occupies solid market positions in the manufacture of a wide variety of cutting and welding equipment and supplies. Markets are mature, cyclical, and subject to intense pricing pressures. Standard & Poor's will continue to monitor the company's financing plans. If the company's financial initiatives result in bondholder impairment or if the company fails to make its interest payments within the 30-day cure period, ratings will be lowered to 'D', Standard & Poor's said. Ratings Lowered And Placed On Credit Watch With Negative Implications To From Thermadyne Holdings Corp. Corporate credit rating CC B Senior unsecured debt C CCC+ Subordinated debt C CCC+ Thermadyne MFG. LLC Corporate credit rating CC B Senior secured debt CC B Thermadyne MFG. LLC & Thermadyne Capital Corp. Corporate credit rating CC B Subordinated debt C CCC+ TRI VALLEY: Completes Final Sale Of Assets ------------------------------------------ Goldsmith Agio Helms, the nation's leading privately-held, sell- side, middle-market investment banking firm, announced the completed sale of Tri Valley Growers' tomato business (including the Red Pack, Tuttorosso and Sacramento brands) to Red Gold, Inc. The sale of the tomato business represents the third and final deal in the three-part transaction encompassing the overall sale of Tri Valley Growers. As previously announced, Del Monte Foods Co. acquired the S&W brand and related business, and John Hancock Life Insurance Co. acquired Tri Valley's fruit business. Goldsmith Agio Helms represented Tri Valley Growers in all three of these important transactions. Kevin G. Jach, Managing Director and Partner of Goldsmith Agio Helms, commented, "These three transactions represent the continuing consolidation in the food industry, as well as the successful conclusion of what has been a very complex sale process." Red Gold, Inc. is a third generation, family owned business located in Indiana. The company was founded in 1942 and sells and markets tomato products throughout the Midwestern and Eastern United States. Tri Valley Growers was formerly headquartered in San Ramon, California. The company was a California-based cooperative that processed fruits and vegetables, with pre-bankruptcy revenues of $800 million. Del Monte Foods Co., headquartered in San Francisco, California, is the largest producer and distributor of canned vegetables and canned fruit in the United States, with net sales of $1.5 billion in fiscal year 2000. John Hancock Life Insurance Co., headquartered in Boston, Massachusetts, is one of the largest lenders to California's food processing industry. John Hancock will operate the Tri Valley fruit business in a newly created company called Signature Fruit. Goldsmith Agio Helms is the nation's leading independent investment banking firm providing M&A advisory services to sellers of middle market businesses. The firm represents public and private companies, with values in the $25 million to $500 million range, in mergers, sales, joint ventures, divestitures, recapitalizations and restructurings. In 1999 and 2000, the firm completed 76 transactions, at purchase price multiples well in excess of industry norms. Goldsmith Agio Helms has 55 professionals with offices in Minneapolis, New York, Chicago, Los Angeles, and Naples, Florida. UNIFORET INC.: Gets 45-Day Extension To File Plan of Arrangement ---------------------------------------------------------------- UNIFORET INC. and its subsidiaries, Uniforet Scierie-Pate Inc. and Foresterie Port-Cartier Inc. have obtained from the Superior Court of Montreal an order extending for an additional period of 45 days the delay to present a plan of arrangement under the "Companies' Creditors Arrangement Act" which will set out the terms of the restructuring of their debts and obligations. The Company intends to keep on its current operations and its customers are not affected by the Court order. Suppliers who will provide goods and services necessary for the operations of the Company will continue to be paid in the normal course of business. Uniforet Inc. is an integrated forest products company which manufactures softwood lumber and bleached chemi-thermomechanical pulp. It carries on its business through its subsidiaries located in Port-Cartier (pulp mill and sawmill) and in the Peribonka area in Quebec (sawmill). Uniforet Inc.'s securities are listed on The Toronto Stock Exchange under the trading symbol UNF.A, for the Class A Subordinate Voting Shares, and under the trading symbol UNF.DB, for the convertible debentures. US INTERACTIVE: Securities Kicked Off From Nasdaq ------------------------------------------------- U.S. Interactive, Inc. (Nasdaq:USIT) announced that the company's securities have been delisted from the Nasdaq National Market. The Nasdaq action to delist was prompted by a Nasdaq Staff decision that concluded that US Interactive has not met all the requirements for continued listing of its securities. About U.S. Interactive, Inc. US Interactive(R) (Nasdaq:USIT) is an Internet professional services company that provides customer management solutions to the communications industry. W.R. GRACE: Rejecting Six Burdensome Lease Agreements ----------------------------------------------------- The W. R. Grace & Co. Debtors are party to six non-residential real property leases for facilities they can't use: Location Landlord -------- -------- 495 N. Semoran Blvd. Pat Legan Winter Park, Florida 4691 Transit Road Jay B. Birnbaum and Williamsville, New York Nathan Lewinger 23829 S. Banning Blvd. Watson Land Co. Carson, California 326 Main Street KAM Holdings, Inc., Cedartown, Georgia dba Pinata, Inc. 1029 280 Bypass Gulf Pacific America, Inc. Phenix City, Alabama 14510 Memorial Drive Hornberger Bros. Properties, Houston, Texas Inc. The Debtors told Judge Farnan that the facilities are empty and they've returned the keys to the facilities to the landlords. Accordingly, pursuant to 11 U.S.C. Sec. 365(a), the Debtors sought authority to reject these burdensome leases. The Debtors sought further authority to reject Guaranties related to the Cedartown, Houston and Phenix City property Lease Agreements. (W.R. Grace Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARNACO GROUP: Obtains Waiver of Certain Debt Covenants ------------------------------------------------------- The Warnaco Group, Inc. (NYSE: WAC) announced that it has received a waiver of certain financial covenants from its lenders through June 15, 2001, which will be filed tomorrow with the Securities and Exchange Commission. To avoid a possible default after expiration of the waiver, Warnaco would require a further waiver or amendment to the covenants. Warnaco is currently exploring all of its alternatives which, as previously reported, include, among other things, the refinancing or restructuring of its existing debt and asset sales. There can be no assurance that the Company will be able to refinance or restructure its debt or engage in asset sales. The Warnaco Group, Inc., headquartered in New York, is a leading manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories sold under such brands as Warner's(R), Olga(R), Van Raalte(R), Lejaby(R), Weight Watchers(R), Bodyslimmers(R), Izka(R), Chaps by Ralph Lauren(R), Calvin Klein(R) men's, women's, and children's underwear, men's accessories, and men's, women's, junior women's and children's jeans, Speedo(R)/Authentic Fitness(R) men's, women's and children's swimwear, sportswear and swimwear accessories, Polo by Ralph Lauren(R) women's and girls' swimwear, Oscar de la Renta(R), Anne Cole Collection(R), Cole of California(R) and Catalina(R) swimwear, A.B.S. (R) women's sportswear and better dresses and Penhaligon's(R) fragrances and accessories. A report on Form 8-K containing the waiver will be filed with the Securities and Exchange Commission. WOMEN.COM: Says Capital Is Insufficient To Sustain Operations ------------------------------------------------------------- Women.com Networks Inc. has suffered recurring losses from operations and has an accumulated deficit of $214.9 million. Women.com has entered into a definitive agreement whereby iVillage, Inc., operator of the iVillage network, contingent upon the satisfaction of certain conditions, will acquire all of the outstanding shares of Women.com. If the sale to iVillage does not occur, Women.com will need to raise additional capital to fund their 2001 operations and may have to reduce certain discretionary spending and scale back their operations. There can be no assurance that the sale to iVillage will occur or that Women.com will be successful in raising additional funding if the sale does not occur. Women.com has incurred significant net losses and negative cash flows from operations since its inception. The Company expects to incur significant operating losses and negative cash flows from operations for at least the next several years. Women.com's continuation as a going concern is dependent on its ability to obtain additional financing to meet its obligations. Revenues were $6.4 million for the three months ended March 31, 2001, a 55% decrease compared to the same period in 2000. The decrease in revenues was primarily due to a significant decline in the internet advertising market. Advertising and sponsorship revenues were $4.3 million for the three months ended March 31, 2001, a 61% decrease over the corresponding period in 2000. Revenues for the three months ended March 31, 2000 also included $1.6 million of production and hosting fees related to the launch of eharlequin.com in February 2000; there were no such production and hosting fees in 2001. The Company believes that its existing cash and cash equivalents may not be sufficient to meet its operating and capital requirements at its currently anticipated level of operations beyond the end of the second quarter of 2001. While the Company may take appropriate actions to change its proposed operations to stretch its current cash positions beyond the end of the second quarter of 2001, additional capital will be necessary to fund operations at currently anticipated levels beyond the second quarter of 2001. There can be no assurance that the Company will be able to obtain additional funds, on acceptable terms or at all. If it cannot raise additional capital on acceptable terms, it will not be able to continue the present level of operations and will have to scale back business and may not be able to further take advantage of future opportunities or respond to competitive pressures, any of which could have a material adverse effect on its business and results of operations. These conditions raise substantial doubt about Women.com's ability to continue as a going concern. WORLD KITCHEN: Posts $44.9 Million Net Loss For Q1 2001 ------------------------------------------------------- WKI Holding Company, Inc., which operates as World Kitchen, Inc., announced results for its first fiscal quarter ended April 1, 2001. Net loss for the quarter was $44.9 million, which includes a $22.1 million charge related to the company's previously announced restructuring plan. Year 2000 first quarter net loss was $10.2 million. Net sales for the quarter were $170.8 million, compared to year 2000 first quarter net sales of $187.9 million. The net sales decline of $17.1 million generally reflects a slower retail economy in 2001 versus 2000, as well as the Company's exit of its cleaning products business. Offsetting some of the sales shortfall were the successful introduction of Martha Stewart rangetop and kitchenware items at K-Mart and successful new product launches including the CorningWare(R) Tableware line, Chicago Cutlery(R), OXO SteeL(TM) line of stainless steel kitchen tools and utensils, and OXO Good Grips(TM) enamel tea kettles, garden tools and cutlery products. Gross profit for the first quarter of 2001 was $48.6 million, a decrease of $12.0 million when compared to first quarter 2000 gross profit of $60.6 million. As a percentage of net sales, gross profit decreased to 28.4% in the first quarter of 2001 from 32.2% in the first quarter of 2000. The decrease is primarily attributable to the Company's decision to temporarily idle certain of its manufacturing facilities in the first quarter of 2001 to reduce inventories and manufacturing costs. This action led to higher unabsorbed fixed manufacturing costs as a percentage of net sales, which were expensed in the first quarter. In addition, in the first quarter of 2001, the Company discontinued a significant number of its stock-keeping units (SKUs) throughout all of its product lines to reduce inventory and warehousing costs and to improve customer service. A portion of these discontinued products were liquidated in the first quarter of 2001. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $9.2 million in the first quarter of 2001, excluding a $22.1 million charge for restructuring and rationalization. First quarter 2000 EBITDA was $17.1 million and excluded $4.6 million in integration related expenses. "While not yet where we want to be long-term, given the current economic conditions, these results are in line with our expectations for the first quarter," said Steven G. Lamb, World Kitchen president & CEO. "We are making good progress in implementing the previously announced restructuring plan. Once complete, these programs will positively impact our cost structure and will enable World Kitchen to set new performance standards for customer service in the housewares industry, driving future business growth and improved financial performance." Restructuring Implementation Underway On April 3, 2001, World Kitchen announced a plan to restructure several aspects of the Company's manufacturing and distribution operations in order to reduce costs and improve customer service. This measure will result in a 2001 restructuring charge of approximately $35.0 million. First quarter 2001 charges for this restructuring and rationalization program were $22.1 million. The previously announced program includes three major components: Exit from the Martinsburg, West Virginia facility by the end of the first quarter 2002, where the CorningWare(R) and Visions(R) product lines are produced. The Company remains committed to these brands and is evaluating several alternative sources in order to ensure future product supply. Consolidation of distribution operations at Waynesboro, Virginia into World Kitchen's existing distribution centers at Monee, Illinois and Greencastle, Pennsylvania. Waynesboro is expected to cease operations during the first quarter of 2002. Significant restructuring of metal bakeware manufacturing at Massillon, Ohio to reduce costs. On April 12, 2001, the Company announced the closure of its cutlery facility in Wauconda, Illinois as an additional step in the Company's restructuring plan. The Company expects to cease manufacturing at the facility and re-source its cutlery product line by year-end 2001. This decision will result in an additional charge of approximately $5.0 million, which will be recorded in the second quarter of 2001. World Kitchen's principal products are glass, glass ceramic and metal cookware, bakeware, kitchenware, tabletop products and cutlery sold under well-known brands including CorningWare, Pyrex, Corelle, Visions, Revere, EKCO, Baker's Secret, Chicago Cutlery, OXO and Grilla Gear. World Kitchen has been an affiliate of Borden, Inc. and a member of the Borden Family of Companies since April 1998. The Company currently has major manufacturing and distribution operations in the United States, Canada, United Kingdom, South America and Asia-Pacific regions. Additional information can be found at: www.worldkitchen.com. ZAMIAS SERVICES: Files for Chapter 11 Protection in Pittsburgh -------------------------------------------------------------- Zamias Services Inc. and four limited partnerships controlled by the Zamias family filed for chapter 11 protection on Friday in the U.S. Bankruptcy Court in Pittsburgh, according to the Associated Press. The Johnstown, Pa.-based company, one of the nation's largest owner and manager of malls and shopping centers in the United States, is a commercial real estate firm that acquires, develops and manages retail properties. Damian Zamias, president of Zamias Services, said that he does not expect the bankruptcy to affect the company's properties or projects. (ABI World, May 16, 2001) ZAMIAS SERVICES: Chapter 11 Case Summary ---------------------------------------- Debtor: Zamias Services Inc., A Pennsylvania Corporation 300 Market Street Johnstown, PA 15901 Chapter 11 Petition Date: May 14, 2001 Court: Western District of Pennsylvania (Pittsburgh) Bankruptcy Case No.: 01-25079 Judge: Bernard Markovitz Debtor's Counsel: James R. Walsh, Esq. Spence Custer Saylor Wolfe & Rose 400 U.S. Bank Building P.O. Box 280 Johnstown, PA 15907 814-536-0735 ZANY BRAINY: Wells Fargo Extends $115 Million DIP Financing ----------------------------------------------------------- Wells Fargo Retail Finance announced it will provide a $115 million debtor-in-possession (DIP) line of credit to Zany Brainy, Inc., a leading specialty retailer of non-violent, gender-neutral toys, games, books and multi-media products for kids. The King of Prussia, Pa.- based retailer filed for Chapter 11 protection in Wilmington, Delaware. "With a strong base of core profitable stores, Zany Brainy is well positioned to restructure its operations and its finances and emerge as a stronger company," said Wells Fargo Retail Finance Senior Managing Director and Co-COO Andrew H. Moser. "The management team is focused on the areas of the business that need to be restructured in order to position the Company for the long-term, and we stand behind them in this effort." "In addition to providing the necessary financing to address our liquidity issues, we selected Wells Fargo Retail Finance for our DIP facility for their experience in retail restructuring," said Tom Vellios, President and CEO of Zany Brainy. "With our DIP in place, we have immediate access to the necessary funding to move forward in executing our business plan. We look forward to working closely with Wells as we work to restructure our business and position the Company for the future." Wells Fargo Retail Finance Based in Boston with additional offices located in Philadelphia and Los Angeles, Wells Fargo Retail Finance brings more than 25 years of experience in providing working capital to retailers, and more than 150 years of collective experience as retail operators. Today, the company has nearly $1.8 billion in loan commitments to retailers throughout North America. Wells Fargo & Company is a diversified financial services company with $280 billion in assets, providing banking, insurance, investments, mortgage and consumer finance from more than 5,700 stores and the Internet (www.wellsfargo.com) across North America and elsewhere internationally. Zany Brainy, Inc. Zany Brainy, Inc., is a leading specialty retailer of high quality toys, games, books and multimedia products for kids. The Company combines a distinctive merchandise offering with superior customer service and in-store events to create an interactive, kid-friendly and exciting shopping experience for children and adults. The Company presently operates 187 stores in 34 states. BOOK REVIEW: The Wreck of the Penn Central ------------------------------------------ Authors: Joseph R. Daughen and Peter Binzen Publisher: Beard Books Softcover: 365 Pages List Price: $34.95 Review by: Regina Engel On June 21, 1970, the Penn Central Transportation Company filed for bankruptcy reorganization under Section 77 of the Bankruptcy Act, a mere 872 days after the largest railroad in the United States history was formed with the merger of the Pennsylvania and New York Central Railroads. While the memories of the major players were still very fresh, the authors set out to examine the causes of the stunning collapse. Their exhaustive and in- depth analysis was originally published in 1971, but as the authors recognized, "[t]he dimension of the disaster that befell the Penn Central Transportation Company, its 100,00 creditors, its 118,000 stockholders, and the hundreds of lesser companies tied economically to the railroad will provide food for thought for students of business history for years to come." The largest merger of the nation's history came about following more than ten years of discussions, but one of the points the authors make is that because it was so uncertain that the merger would in fact take place, very little was done during those years to actually work out the details of merging the two very differently operated companies. The authors offer fascinating accounts of the personalities and backgrounds of the people involved. Chapter 2 gives a brief overview of the history of the railroad as a necessary backdrop to understanding the conditions in the industry at the time of the merger. Succeeding chapters focus on the three principals, Alfred E. Perlman of the New York central who became president of the Penn Central, Stuart T. Saunders, who had led the Pennsylvania Railroad for the previous five years and was named chief executive officer and chairman of the board for the merged company, and David C. Bevan, the Penn Central's chief finance officer. Detailing the differences in style and social position, the authors contend that the failure of these men "to work as a team and to inspire their subordinates to do so hastened Penn Central's collapse." In addition to the people problem, the authors devote chapters to the opposition of the future Pennsylvania Governor Milton J. Shapp, and David Bevan's forays into questionable outside investments, including an airline business, which the authors maintain diverted badly needed attention away from the problems of the railroad. Similarly, the authors question whether the attempt to deal with the railroad had considerable real estate holdings, hurt more than help by taking time and attention away from the railroad's problems. The concluding chapters contain discussions of numerous other problems that precipitated the collapse, from the continuing decline in the railroad industry, in part because of competition from other means of transportation, to the bad winter of 1970, the poor condition of equipment, labor problems, government regulation, and, in the end, the failure of the government to provide loan guarantees. In the final chapter, the authors quote extensively from Perlman's and Saunders' assessment of what went wrong. Despite their differences and attempts to lay blame, they both conclude that without government support, the problems of a very sick industry were too much for any management team to overcome. ********* Bond pricing, appearing in each Monday's edition of the TCR, is provided by DLS Capital Partners in Dallas, Texas. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658- 9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Debra Brennan, Yvonne L. Metzler, Bernadette de Roda, Aileen Quijano and Peter A. Chapman, Editors. Copyright 2001. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. *** End of Transmission ***